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Brexit impacts UK companies supplier risk appetite

A new study by Cranfield School of Management, using Dun & Bradstreet data, investigates the risks and measures UK and EU businesses have taken regarding their supply bases since the Brexit referendum in 2016. The findings have been drawn from analysis of 1.3 million anonymous transactions.

Dr Heather Skipworth, Associate Professor of Logistics and Supply Chain at Cranfield University, said: “Our research suggests that, so far, the Brexit process has had an impact on the appetite UK-based buying companies have for supplier risk. We have seen both supplier financial risk and foreign exchange risk reduce. The latter could be explained by UK-based companies shifting a proportion of their supplier base from the EU to the UK, as shown by our analysis, which could be to avoid potential trade barriers arising from Brexit.”

Trade and supply chains on the agenda since the referendum

Between 2016 and now, trade and supply chains have been on the agenda of almost everyone involved, owing to the uncertainty in operating conditions. The report investigates how companies have been reacting to mitigate some of the impact Brexit might have on their transactions with suppliers, answering the following questions:

Have there been any changes in the supplier base after key Brexit events?
Have buyers based in the UK tended to shift their supplier base to the UK?
Have buyers based in the EU shifted their supplier base away from the UK?

Reducing appetite for risk

Dr Skipworth continued: “Since the referendum, UK buying companies’ perception of Supplier Criticality has increased. This suggests that, while actual supplier risks have decreased, buying companies’ perception of dependency and risk exposure in their supply chains has increased. This is most likely fuelled by the uncertainty companies are facing from the Brexit process.”

The research suggests that:

Perceived dependency on key suppliers increased 13% after Article 50 was signed
Foreign exchange risk decreased almost 3% over the Brexit timeline, with a sharp drop a few months after Article 50 was signed - indicating that UK companies may be increasing sourcing within the UK or asking suppliers to transact in GBP
The proportion of EU-based suppliers in the supply bases of companies in the UK has reduced by 2.8% since the referendum
The proportion of UK-based suppliers in the supply bases of companies in the UK has increased by 2.6%

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