Almost half of European businesses have started looking to replace British suppliers with competitors from inside the EU after concerns about higher tariffs after Brexit, according to a new survey.

More than one-quarter of European supply chain managers intend to re-shore all or part of their supply chains to Europe, with 46 per cent anticipating a greater proportion of their supply chain being removed from the UK, based on research by the Chartered Institute of Procurement and Supply, which surveyed over 2,000 global supply chain managers.

“Diplomats either side of the table have barely decided on their negotiating principles and already supply chain managers are deep into their preparations for Brexit,” said Duncan Brock of Cips.

“Both European and British businesses will be ready to reroute their supply chains in 2019 if trade negotiations fail and are not wasting time to see what happens,” he added.

British businesses have made less progress in replacing European suppliers. Nearly one-quarter of British firms have not done any work to prepare for Brexit, according to Cips.

While significant numbers have started planning for the impact of new tariffs on imports, which are likely to be introduced if the UK leaves the EU single market, only one-third said they were actively searching for alternative suppliers based in the UK to replace their current EU-sourced supply chain.

The institute said the reshoring of supply chains by British companies back to the UK could represent a significant opportunity for small businesses looking to pick up new contracts.

But it added that the costs of Brexit for business — whether because of the weaker pound or the introduction of tariffs on imports — were likely to be passed on to small suppliers and eventually consumers.

The effects of sterling devaluation are already being felt by both companies and consumers, with companies reducing the size of consumer products — as Mondelez did with its Toblerone bar last year — or increasing prices, as Unilever tried with its Marmite spread. Almost two-thirds of the British companies surveyed said their supply chains had become more expensive as a result of the fall in sterling since the referendum last summer, with nearly one-third being forced to renegotiate some contracts as a result.

British managers were not optimistic about the prospects for trade talks. Almost 40 per cent said they believed the UK had a weak negotiating position, with 33 per cent concerned about a lack of supply chain expertise and knowledge in Britain.

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