More SME manufacturers could consider following in the footsteps of major UK-based OEMs by strengthening their domestic supply chains ahead of Brexit. However, care is needed to weigh up the pros and cons before doing so.
Uncertainty surrounding the reality of Brexit has made it difficult for businesses to plan ahead and for this reason, many SMEs have opted to take a ‘wait and see’ approach. Despite this, some businesses have been seeking advice about potentially transferring assets to the UK and rebuilding supply chains closer to home.
Research published by the CIPS last year, found that 32 percent of UK supply chain managers are seeking to replace EU suppliers with others in the UK.
There may be an opportunity for some component manufacturers, particularly those serving the UK’s automotive industry, to de-risk their supply chains by encouraging supply partners to set up operations in Britain. Recent moves by some of the larger OEMs, such as Nissan, to strengthen their Uk-based supply chains could encourage them to behave similarly.
For small and medium-sized businesses however, taking such decisions can be complex and involve a high level of supply chain collaboration. For example, a trusted supplier based in Poland may lack the funds to transfer operations to the UK and require some assurance of order volumes based on reliable business forecasts. Instead of moving operations lock, stock and barrel, suppliers could set up smaller satellite operations in the UK to store goods or perform some post-production finishing.
Nurturing the manufacturing sector
The Government has announced plans to invest £725 million over the next three years in an Industrial Strategy Challenge Fund (ISCF) to nurture innovation and respond to global challenges and is encouraging Catapult Centres to play a greater role in connecting customers and supply chains. As part of a move to accelerate the way to the driverless car revolution, the National Infrastructure Commission (NIC) has also announced plans for an industry competition to encourage engineers, academics and entrepreneurs to come up with infrastructure solutions.
These initiatives aim to support innovation and make the UK an attractive place for businesses investing in R&D. Innovation centres can help small and medium-sized businesses to get established or scale up more quickly and access to this kind of support could provide the extra pull for EU-based suppliers to make the move to the UK. In addition to encouraging key supply partners to move to the UK, some SME manufacturers are considering transferring overseas assets, such as plant & machinery and staff, back to Britain.
Transferring assets back to the UK won’t be right for all businesses and there can be important advantages to having operational facilities close to export markets, for example. However, some businesses are considering moving assets back to the UK prior to the Brexit, while the free movement of people and capital is still possible.
Before doing so, it is important that businesses carry out high-level forecasting and modelling based on key areas of uncertainty and a number of post-Brexit trading scenarios. This analysis should consider transfer costs and any potential impact on productivity together with all aspects of manufacturing in a different territory.