Global tensions spur supply chain adjustments 

10th August 2023

A new report by the Institute of Directors has found that over a fifth of UK importers have had to alter their supply chains due to geopolitical tensions, with China being a major focus.

The report states that 20.5% of importers have already made changes, while 15% are considering doing so. The majority of firms, however, have not been affected by global tensions. The report highlights that businesses are seeking stability in their supply chains and are willing to increase costs in the short-term to achieve this. The report also suggests that the UK should adopt a more cautious approach to China. UK-China relations have soured in recent years, with tensions rising over issues such as China’s military exercises near Taiwan and its refusal to criticise Russia’s invasion of Ukraine.

Emma Rowland, Trade Policy Advisor at the Institute of Directors, said “It is clear businesses are sensing geopolitical shaped clouds on the horizon, particularly whilst China’s standing with the US, Russia and Taiwan remains uncertain. The pandemic, coupled with the invasion of Ukraine, has exposed vulnerabilities in international supply chains and an overreliance on countries perceived to be high-risk to the UK.”

“Ultimately, firms are pursuing long-term stability in their supply chains, so they can provide certainty to their own end customers. They want to know they can rely on their international business partners long-term and not be hampered by sudden disruptions. Many businesses also feel uncomfortable trading with regimes that do not conform to western democratic ideals.”

“Whilst it is broadly felt that a complete decoupling from China is economically impractical, at least for now, the fact that a significant number of businesses are willing to take on extra costs to secure their global operations shows attitudes to global trade are shifting.”

% of importers
We have altered our supply chain as a result of geopolitical tension 14.9% 20.5%

 

We are considering altering our supply chain as a result of geopolitical

tension but have not done so yet

10.5% 14.5%
Our supply chain has not been affected by geopolitical tension 42.4% 58.4%
Don’t know 4.8% 6.6%
N/A 27.4% N/A

 

 

City AM