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Brexit causing tough decisions for smaller suppliers

Posted on 17 November 2017

Supply chain companies are having to make some tough decisions because of Brexit.

Doubts about future trade agreements is causing big firms to falter when it comes to investing in plant.

And some have already started passing work to smaller firms on the promise of short-term high-value contracts.

But that means smaller firms are having to choose between investing in contracts that could expire alongside Britain’s membership of the EU or turning their backs on the available work.

That was the message delivered by senior representatives of the manufacturing sector in the East Midlands at a summit staged by the Chamber yesterday morning.

The general consensus was that Government was not being forceful enough in negotiations with the EU and there appears to be a lack of cross-party unity, resulting in doubt and uncertainty about the UK’s future.

Chris Hobson, the Chamber’s Director of Policy, who led the summit, said: “We are hearing of more and more instances where larger manufacturers are looking to outsource orders that they don’t have the capacity to fulfil rather than invest capital in new equipment.

“This lets them bridge the gap but becomes a double-edged sword for sub-contractors who may have to decide between taking the additional work or refusing it because they don’t want to invest in plant that could be sitting idle in 16 months’ time.”

The summit also heard that companies are looking to reshore work, particularly from China where prices are rising as the economy grows. In some cases alternative overseas locations are being sought, such as Cambodia and Vietnam but less robust practices is resulting in a “buy cheap, buy twice” warning.

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