Strategy in place to boost UK supply chain resilience

Strategy in place to boost UK supply chain excellence (1)
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The UK Government has recently launched a new initiative to boost UK supply chain resilience. The Critical Imports and Supply Chain Strategy aims to safeguard the supply of critical goods such as minerals, medicines and semiconductors. With the NHS and UK manufacturing at risk of global supply chain shocks, these measures aim to safeguard against that.

With the end goal of boosting the economy, HM Government will use cutting-edge research to map the impacts of shocks on the supply chain. Including those caused by the Covid pandemic and the war in Ukraine. This will provide a better understanding of how the UK can secure the goods it needs in the future.

More than 100 UK firms are said to have backed these plans including the Society of Motor Manufacturers and Traders (SMMT), British Pharmaceutical Industry (ABPI) and Green Lithium. With their contributions, they are helping ensure the strategy develops resilience and security within supply chains.

The Minister for Industry and Economic Security, Nusrat Ghani, launched the strategy on January 17th 2024 during a visit to Heathrow Airport. There, she is quoted as saying, “There are many unpredictable events that can threaten our access to vital goods, from the pandemic, Russia’s illegal war in Ukraine, and the ongoing attacks in the Red sea”. She also emphasized the importance of the strategy in helping UK companies build strong and resilient supply chains for vital goods, thus avoiding dependence on protectionist or coercive states.

Why is the Critical Imports and Supply Chain Strategy required?

The need for a reliable flow of vital goods is vital for the success of UK manufacturing. According to HM Revenue and Customs, the UK was a net importer of goods, with imports exceeding exports by £165 billion. The UK’s manufacturing trade was dependent on simultaneous imports and exports, with 75% of the UK’s manufacturing trade between 2018 and 2020 being dependent on imports and exports in the same sector.

The importance of a reliable flow of goods within manufacturing supply chains underpins national prosperity, security and the delivery of essential services. With recent global events, including the Ukraine war, and now rising tension within the middle east and global shipping lanes, global supply chains have been severely hampered.

UK manufacturers are currently faced with difficulties when importing for their supply chains. Alongside recent geopolitical events they include high inflation, rising costs, logistical issues, red tape, bureaucracy and customs and border controls.

With these issues in mind, HM Government aims to work with businesses and international partners across five key priorities. The first will make the UK government a center of excellence for supply chain analysis and risk management. It will do so by building on its existing expertise to better understand the goods and broader supply chain systems. This includes transport routes and infrastructure that the UK needs now and in the future.

The next objectives from government is removing critical import barriers to support the UK’s “business-friendly” environment. As part of the plans, a Critical imports Council will be established to identify and address problems within the UK supply chain to counter future global disruptions.

Further areas of the strategy include building up the UK’s responsiveness to global supply chain shocks. In addition to ensuring the UK can adapt to long-terms trends.

How impactful is this strategy?

The paper published by HM Government on the Critical Imports and Supply Chains strategy does not provide any specific data on its impact to the UK economy. Nor any figures for businesses and consumers. The paper simply highlights what the strategy aims to do in order to build resilient supply chains and safeguard critical imports.

Questions can then surely be raised, albeit slightly critical. The first question is this; how reliant should the UK be on imports? Especially in terms of economic growth. After all, the Bank of England emphasized the importance of productivity in growing the economy. According to the office of national statistics, UK manufacturing’s importance for the UK economy outstrips its relatively small size. Their data indicates that manufacturing sectors are typically more productive, and is actually responsible for 15-22% of the economy. UK manufacturing is also responsible for 18-27% of employment. Shocks to UK manufacturing can have a major impact on the broader UK economy.

This leads onto the next question. Surely, a focus should be made on encouraging the purchase and of UK made goods over imported replicas? Therefore limiting risk of disruption through an industrial renaissance and supporting job growth and security. An argument can certainly be made that there will always be a level of dependence on imported materials. This of course is true to a certain extent.

It’s therefore bruising to see in recent news the closure of Port Talbot’s steel furnaces. With 3,000 jobs losses, along with a further 2,000 jobs at risk at British steel, the UK will see all four of its blast furnaces closed. For the next four years, whilst a transition to electric blast furnaces takes place, it will mean the UK will be the only country in G20 not to produce its own steel. Therefore, this is a critical problem as the UK will now be overly reliant on imports. This puts the UK in a precarious position, leaving the supply chain vulnerable to price hikes and disruption. Something the Government strategy is looking to avoid.

What’s more, Tata Steel has already admitted losing over £1 million per day in operational costs. And with extremely high industrial electricity costs hampering UK manufacturing, this will only grow using electric arc furnaces. This would then see a hike in steel prices, on top of rising costs from imports. This leads to the final question; wouldn’t it be wise to invest in the infrastructure of UK manufacturing and do something about profiteering energy firms? Even offer an alternative solution by reducing the dependency of imported energy?

Conclusion

The impact of the strategy remains to be seen, despite growing support from industrial leaders. Yet important questions remain unanswered, and recent events have certainly gone against government plans. Hopefully, these plans recognize the need to reduce the dependency of imported energy, and identify ways to reduce soaring high industrial costs to support UK manufacturing.

Arguments can certainly be made that more needs to be done to support the growth of industry, which in turn will grow the economy. As the most productive sector to the UK economy, UK manufacturing has more to offer. And an industrial renaissance should be at the forefront of economic growth plans and job security.

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