LONDON — Around 45% of European companies are seeking to replace UK suppliers with local businesses in preparation for higher international tariffs if Brexit negotiations fail.
Meanwhile, a third of UK businesses are actively looking to replace European suppliers, according to a survey of 2,111 supply chain managers carried out by the Chartered Institute of Procurement and Supply.
The study found that 65% of UK companies have seen their supply chain increase in price as a result of the weaker pound, with 29% having to renegotiate contracts as a result, CIPS said.
Gerry Walsh, CEO of CIPS, said: “Diplomats either side of the table have barely decided on their negotiating principles and already supply chain managers are deep into their preparations for Brexit. Both European and British businesses will be ready to reroute their supply chains in 2019 if trade negotiations fail and are not wasting time to see what happens.”
“Fluctuations in the exchange rate or the introductions of new tariffs can dramatically change where British companies do business. The separation of the UK from Europe is already well underway even before formal negotiations have begun,” he added.
The tone between the UK and EU has been combative in the early days of the talks, and businesses are concerned that trade tariffs and customs barriers may increase if a special trade deal isn’t struck within the two-year time limit.
The two sides have failed to even agree on the order in which deals on the status of EU nationals in the UK, the level of the so-called divorce payment calculated at around €100 billion and the Northern Irish border should be approached.
On Sunday, the UK’s Brexit minister, David Davis, said the structure of the timetable of the negotiations will be the “row of the summer,” according to a report in the Financial Times.
“How on earth do you resolve the issue of the border with Northern Ireland and the Republic of Ireland unless you know what our general borders policy is, what the customs agreement is, what our trade agreement is?” Davis said.