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Firms rethinking supply chains due to global tensions

A growing number of British businesses are said to be shifting their supply chains away from China as international tensions rise, while some are re-shoring supply to the UK to combat climate change

The relationship between Beijing and the West has deteriorated in recent years and has recently been rocked by a high-profile visit to Taiwan by Nancy Pelosi, Speaker of the US House of Representatives. China, which lays claim to Taiwan, reacted strongly by conducting military exercises around the island and placing tariffs on thousands of imports and exports.

Conservative leadership candidates Liz Truss and Rishi Sunak have also sought to exhibit a tougher stance on China in recent media appearances. Now, the Director General of the Confederation of British Industry (CBI) has warned that thousands of UK companies are rethinking their supply chains in anticipation of the perceived anti-China political sentiment.

Speaking to the Financial Times, Tony Danker warned that the rising tensions risked disruption to supply chains and inevitably would make products more expensive and fuel further inflation:

“Every company that I speak to at the moment is engaged in rethinking their supply chains…because they anticipate that our politicians will inevitably accelerate towards a decoupled world from China. It doesn’t take a genius to think cheap goods and cheaper goods may be a thing of the past.”

The Director General added that the UK needed “strategic alliances” with new and existing trade partners and that companies needed to build resilience in preparation for the possible disruption ahead. The UK has agreed, or is in the process of negotiating, new trade deals with a number of countries, including Japan, Australia, New Zealand, Canada and the Gulf nations.

In related news, new research has revealed that UK SMEs are increasingly seeking domestic suppliers as part of efforts to reduce the carbon footprint of their supply chains. According to a survey conducted by NatWest, nearly half of SMEs (46 per cent) have already switched to a domestic supplier at least partly due to sustainability concerns, and a further 20 per cent are looking to do so over the next year.

Andrew Harrison, Head of Business Banking at NatWest Group, commented:

“Global supply chain pressures have focused SME’s priorities on switching to UK suppliers. This ensures they have the consistency they need while matching up to their increased sustainability priorities.”

SME manufacturers in Greater Manchester can access expert support on supply chain management and re-shoring through our dedicated Manufacturing Service.

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