Following the Brexit referendum, with the dramatic fall of the pound was interpreted as being good for the economy by the Pro-Brexit interest groups, the results of a survey conducted by the Chartered Institute of Procurement and Supply (CIPS), are an eye opener.
On Monday, the results of a survey conducted by the Chartered Institute of Procurement and Supply (CIPS) showed that most European businesses plan on cutting back orders from their British suppliers due to the slow progress of Brexit talks.
As per the survey, 63% of non-British European companies expect to relocate a part of their supply chain out of Britain, up from 44% in May, said the Chartered Institute of Procurement and Supply (CIPS).
With only 17 months left before Britain exits the European Union, the lack of progress in the negotiations have given grounds to fears among executives that Brexit is likely face a cliff’s edge rather than a smooth transition.
The survey by CIPS has raised the prospects of disruption, including loss of business, for British manufacturers who have EU clients.
On Sunday, the Confederation of British Industry said nearly two thirds of British firms will have implemented a Brexit related contingency plans by March if Britain and the EU fail to strike a transitional deal by then.
Last week, both parties had said they were ready to speed up the talks, however according to CIPS, it was already too late for many businesses since many EU firms are likely to re-allocate resources within their supply chain and bypass British producers.
“British businesses simply cannot put their suppliers and customers on hold while the negotiators get their act together,” said Gerry Walsh, CIPS’ group chief executive officer. “The lack of clarity coming from both sides is already shaping the British economy of the future – and it does not fill businesses with confidence.”
Last month, Philip Hammond, the British finance minister had said that a transition deal needed to be struck by early 2018.
According to CIPS, nearly one fifth of British businesses were struggling to secure contracts that go beyond March 2019, the date when Britain is set to leave the European Union.
CIPS’s survey also showed that the pound’s plunge following the Brexit referendum did more harm that good to the British economy with nearly two-thirds of respondents saying the fluctuations of the pound increased the cost of managing their supply chains.
As a result, Hammond has come under increasing pressure to lend a help hand to British businesses as he prepares his November 22 annual budget.
EEF, a manufacturing association has urged him to adopt measures that will boost Britain’s investment performance.
“The chancellor has to offset acute anxiety among companies over Brexit with a budget that reassures business the government will deliver a comprehensive and ambitious industrial strategy,” said EEF chief executive Terry Scuoler.
EEF’s recommendation to Hammond include the boosting of capital allowances and tax credits for research and design for British companies.
The CIPS survey of 1,118 supply chain managers was conducted between September 4 to October 5.
A total of 106 EU-based businesses with British supply chains took part in the survey.