UK firms overhaul supply chains after Brexit and pandemic cause havoc – ONS

Nearly a third of firms across Britain’s manufacturing, wholesale and retail trade sectors have suffered supply chain problems as the pandemic and Brexit wrought havoc, according to new figures.

The Office for National Statistics (ONS) said 30% of businesses in those sectors reported global supply chain disruption in January, according to data from its regular business insights and conditions survey.

It signalled that 16% of all UK firms were hit by supply chain issues – or as many as 26% when businesses with fewer than 10 employees are stripped out.

The woes have seen one in 20 UK businesses (5%) overhaul their supply chains due to the end of the Brexit transition period on December 31 2020, with some switching to UK suppliers, or EU suppliers with UK operations, and many diversifying their supply chains.

The ONS data revealed that more than half (58%) of firms that have changed supply chains were using more UK suppliers since Brexit, although that is down from 71% earlier in the year.

British firms have been hit by a double whammy of Brexit fallout and pandemic pressures on supply chains, with sectors across most of the economy suffering staff shortages, shipping and distribution problems, and issues with the availability of a raft of materials and goods.

Omicron and lockdowns before Christmas compounded these problems, according to the ONS.

It said analysis of recent data shows that while global supply chain pressures are at historically high levels, “there are signs that these may have peaked and started to moderate a little”.

But there are fears that Russia’s invasion of Ukraine will further impact global shortages.

Hundreds of thousands of firms worldwide are believed to rely on Russian and Ukrainian suppliers, while there are worries the war will also lead to further shortages of semi-conductor chips as Ukraine supplies around 50% of rare gases critical to their production.

Global chip shortages have been hitting the new car market hard, leading to lengthy production delays and sending prices across the sector soaring.

Few sectors have emerged unscathed, however, by the worker and material shortages that have emerged since last summer as economies worldwide recovered from the pandemic.

The ONS said while there was clear evidence that both Brexit and the Covid-19 crisis have been taking their toll on supply chains, “it is challenging to accurately measure to what extent business supply chains have been affected so far and, if so, whether they are likely to be permanent”.

It added that the changes made to supplier bases may help with future shocks.

“The desire to reduce offshore supply implies businesses in the UK might be looking to minimise risks from trade disruption, making their supply chains more resilient in the wake of EU exit and the coronavirus pandemic,” according to the report.