British business is still woefully underprepared for the supply chain impact of Brexit with six weeks to go as COVID wreaks havoc with their plans.
Broker Lockton has undertaken research which has uncovered the devastating impact of Covid-19 on UK manufacturers’ Brexit preparedness.
In its survey of 500 UK manufacturers, almost half (46%) admitted their supply chain plans have been negatively affected by the Covid-19, with 25% stating they have not made appropriate arrangements with just six weeks left of the transition period.
Just six per cent of all manufacturers with international supply chains say they have seen no impact on their Brexit preparations highlighting the scale of the setback caused by the pandemic.
The findings also highlighted how smaller businesses are most exposed to post-Brexit supply chain risks with 30% stating they have failed to put the necessary provisions in place compared to 19% of large companies.
Lockton warned that with six weeks before the transition period ends firms had to ensure they had secured their supply chains.
The research found 42 per cent of companies said they have made some efforts to localise supply chains, with a further 20 per cent believing they have made every relevant step they need to.
Reallocating capital to cover extra costs, using data tools to ease customs and tax complications, diversifying suppliers and hiring extra staff have all been undertaken by 38 per cent of companies so far. Only 24 per cent said they have their alternative supply chain measures in place and 21 per cent who have adapted their product offering to limit their use of international suppliers.
“The impact of Covid-19 means UK manufacturers are now exposed to a growing number of supply chain risks, with many ill-prepared to manage these,” said the broker. “Of those surveyed, 39% admitted they have not yet taken any action to manage their foreign exchange risk, and further 36% said they are unprepared to manage the risk of increased product calls. More than a third of respondents have also failed to take action to prepare for supply chain delays (35%), risks to administration costs & processes (35%) and the renegotiation of long-term contractual commitments (35%). “
Debbie Day, Managing Partner, Lockton comments: “This has clearly been a difficult year for manufacturers who have had to adapt to the significant disruption of the pandemic, whilst trying to overcome the challenges around the uncertainty of the EU withdrawal, which is now only a few weeks away.
“Each aspect of the supply chain needs to be reconsidered and particularly what risks businesses have been exposed to, and to what extent. We’ve seen that many businesses are taking the necessary steps, in terms of securing alternative suppliers and putting in place the resources to work through the incoming tax and administrative changes, but a significant proportion are still behind where they need to be.
“However, until the final terms of Brexit are settled upon, it is essential for businesses to undertake full supply chain risk assessment, so that they can fully understand their exposure and the cost implications. It is then important to put in place the right insurance cover to ensure that firms are protected against these risks and create a buffer against unexpected losses.”