UK manufacturers increase prices to offset Brexit related costs

Almost half of manufacturers surveyed (46%) had already increased their prices with another 58% preparing to do so, the survey by the Chartered Institute of Procurement & Supply (CIPS) has revealed.

This is significantly higher than the all sector results in the survey which posted at 32% and 41% respectively as the sector is under threat from potential tariffs.

The CIPS research is the third in a series of surveys which have tracked the impact of Brexit on supply chains since May 2017.

This research is the output of a survey of 2,204 supply chain managers – the professionals responsible for negotiating with the UK’s suppliers and clients at home and abroad.

More than 20% are to reduce their workforce

The cost reduction programme doesn’t stop there as a fifth (21%) of manufacturing companies said they would also reduce their workforce to manage Brexit costs which is a threat to workers concerned about wage stagnation and inflation eating away at household budgets.

The cost-driven focus in the sector also means the expectation of cheaper prices from suppliers at a time where relationships have become more strained.

More than one in ten procurement professionals said they were having more difficulties with suppliers (14%), pushing supplier costs lower (56%) and the same number are also looking to renegotiate contracts with their suppliers.

The survey of 2,204 supply chain managers across all sectors found that 34.5% of UK businesses across all sectors who work with suppliers on the continent are actively looking for alternative suppliers based in the UK as a response to the referendum.

The manufacturing sector posted a higher response at 49% as threats of tariffs and additional quotas, is making manufacturers rethink their supply chain focus towards the UK.

“Manufacturers can no longer absorb Brexit costs themselves”

Dr John Glen, CIPS economist, said: “It’s becoming clear that manufacturers can no longer absorb the costs of Brexit themselves and so the burden of higher prices is spreading to consumers, to suppliers, to clients and reshaping supply chains.

“Though the sector has moved further towards the inshoring route, they’re likely to have difficulty finding suitable alternatives in the UK. It is therefore crucial they don’t burn their bridges with their EU contacts but instead work to build stronger relationships with European partners.

“Businesses should also consider other ways through which they can improve the efficiency of their supply chain and not just focus on costs, such as by embracing new technologies, automating processes and using creativity and, innovation.

“In the end, businesses that fail to plan ahead and use this opportunity to reduce and manage their costs in supply chains efficiently may not survive post-Brexit.”

Currency fluctuations were still having a major impact amongst 70% of respondents, though the less so, down from 75% last year as the pound stabilises and the sector gets used to the ‘new normal’ of a weaker pound.