Researched published by insurance giant Lockton has revealed that 46% of UK manufacturers are behind where they would like to be in planning for Brexit as a result of unforeseen challenges posed by the coronavirus.
Surveying 500 UK manufacturers, the research found that just 6% believe their business to have stayed on track in preparing for Brexit in the face of Covid-19’s spread.
The knock on effect of the turbulence has led a quarter to state that, just weeks ahead of the transition period, that they are unprepared with the appropriate arrangements in place to be able to continue to trade smoothly.
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.
Further detailing the specifics of what businesses may have failed to account for in good time, 39% admitted they have not yet taken any action to manage their foreign exchange risk, while 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%).
With supply chains globally running behind schedule, the greatest action that has been taken by many is a bid to localise supply chains wherever possible. A further 20% believe they have made every relevant step they need to in this area.
Where the challenge has been met head on, expenditure has most often gone toward the recruitment of extra staff to handle the strain, diversification of suppliers in order that bottlenecks do not overly stress the business and the employment of tools to ease customs and tax complications. 24% believe they have alternative supply chain measures in place and 21% state they have adapted their product offering to limit their use of international suppliers.
Whilst the Brexit deadline looms, uncertainty around the terms of the exit and the ongoing COVID-19 pandemic mean that manufacturers foresee further long-term challenges. More than half (53 per cent) of businesses think they will need to continue to find alternative supply chain options in the first year after Brexit, and a further 50% believing they will continue planning to localise their supply chain during this period.
As a result of the additional stresses placed on businesses, 45% anticipate having to increase their prices for consumers during 2021.
Debbie Day, Managing Partner at 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 the final terms of Brexit are settled upon, it’s 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.”