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Brexit to Shift Supply Chain Strategies for UK Retailers

Among the multitude effects Brexit will have on the U.K. and the world, British retailers are most concerned about how their supply chains will shift as a result.

Now that the U.K. is leaving the European Union, a new report by Barclays says the origin of goods in British stores could start to change—and Asia and Africa are likely to benefit biggest.

Retailers are already reviewing how their supply chains will operate post-Brexit, and 76 percent have said they’ll look to build more efficient supply chains, 30 percent said they may change suppliers and 28 percent said they’d source from different countries.

The shifts could be a boon for Britain’s economy (which could prove vital as the country takes strides to avoid a recession), as 32 percent of those surveyed said they will source more from the U.K. Fifty-two percent said they would increase supply chain activity in India and 43 percent pointed to China. Products hailing from Africa could become more prevalent too, with 38 percent of companies saying they would source from the continent.

Europe as a whole, however, could take a hit as 43 percent of respondents said they’d reduce what they source from the region.

“Retailers are not overly pessimistic about the impact of the vote on their supply chains, and yet they are still thinking carefully about what they need to do now, in particular with regards to which regions they source from and their foreign exchange strategy,” head of retail and wholesale at Barclays, Ian Gilmartin, said. “It’s also reassuring to note that most retailers don’t intend to pass on costs to their customers and will instead look for other ways to tackle supply chain issues. The really significant news is that a third of retailers surveyed intend to increase domestic supply chain activity.”

Most U.K. retailers expect supply chain costs to stay the same or inch up just slightly, but only 31 percent plan to pass any cost increases onto consumers.

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While some retailers are concerned and preparing for any Brexit backlash, 41 percent think the move will have no real impact and 15 percent think it may even have a positive impact.

It’s where currency comes in that raises greater concerns for retailers.

Eighty-one percent say Brexit will weigh on foreign exchange rates and negatively impact their supply chain, and 70 percent of retailers plan to review their currency hedging as a precaution.

Brexit aside, retailers in the U.K. have similar concerns to the rest of the global market: faster delivery times and unpredictable consumer demand. As such, retailers plan to take the number of delivery options on offer from seven to 10 by 2019, and take heed of consumer concern that they’re stocking products that aren’t suitable for the weather at the time they’re in stock.

“The boom in online retail puts a huge pressure on supply chains. Unpredictable consumer demand, coupled with rising expectations around delivery options and speed of fulfillment mean that cost pressures are going to remain an issue,” Gilmartin said. “It’s important that retailers work with their suppliers to make sure consumers receive the level of service they want, and indeed now expect as standard, in the most cost-efficient way possible for the retailer.”