Covid-19 could see UK manufacturers produce more than £4.2bn of products for British retailers in the next 12 months

A new report by global professional services firm Alvarez & Marsal (A&M) in partnership with Retail Economics has estimated that more than £4.2 billion of products will be on-shored to the UK by British retailers in the next 12 months due the impact of Covid-19 and Brexit.  

Retail businesses are being forced to reassess the future of their global supply networks and how they can not only meet coronavirus-related challenges, but simultaneously address underlying structural changes to ensure they are future-proofed, explained A&M.

In a survey of Europe’s largest 30 retailers, nearly three quarters (70%) said they had conducted a review of their supply chains as a direct result of the pandemic, while more than half (55%) have already begun to diversify their suppliers, with 29% planning to do so within the next 12 months. Also, 14% of those surveyed said they were already sourcing more from domestic economies, with almost half (42%) planning to do so in the next 12 months.

The uncertain outcome of the on-going Brexit negotiations will have significant repercussions for UK retailers and their supply chains, with no-deal creating costly delays and interruption, added A&M, with its analysis stating that a no-deal scenario would create new tariffs of £7 billion for UK businesses, with most of the burden placed on clothing (10.6%) and food (17.1%).

Sustainability is also playing a major role, as European retailers come under increasing pressure to create visible environmental, social and corporate governance (ESG) commitments, with 70% of the retailers surveyed having already begun to change the way they source products to help meet their goals — with the remaining 30% planning to do so in the future.

The study also found that part of these plans incorporate on-shoring, with 46% of retailers stating that they already source more from their domestic economies to help meet ESG targets, while 39% suggest they intend to in the future.

The coronavirus pandemic has also put even greater focus on the use of technology to build more resilient supply chains and accelerated trends towards digital trade and e-commerce, explained A&M. Of the retailers surveyed, the majority said they recognised the need for continued investment into technology, with 77% considering investing in digitalisation, 63% in automation and 23% in artificial intelligence.

www.alvarezandmarsal.com