One third (33%) of UK businesses are concerned about the potential impact Brexit will have on their suppliers and customers, according to new research from R3, the insolvency and restructuring body.
The research, a survey of 1,200 senior business financial decision-makers, carried out for R3 by BVA BDRC, found that 11% of businesses have reviewed the potential impact of Brexit on their suppliers and customers and are ‘very concerned’ by what they had found; another 22% were ‘somewhat’ concerned.
Duncan Swift, R3 President, says: “It’s a serious worry that a third of UK businesses feel they are exposed to a supply chain risk as a result of Brexit.
“A key part of preparing for Brexit is looking at how it affects your supply chain and customers. It’s all very well making sure your own business has put adaptation plans in place, but these plans might not help if the businesses you depend on – customers and suppliers – are unprepared.
A further 16% of businesses said they had yet to review the potential impact of Brexit on their supplier and customer network.
Swift says: “Businesses which don’t understand how Brexit will affect their supply chains are at risk of sleepwalking into trouble.”
“If your customers and suppliers aren’t prepared, you need to plan for how to deal with that. Businesses need to think about the alternative suppliers they can you use, or how they can diversify their customer base. Businesses should also consider if they can work together with suppliers and customers to find shared solutions to what will ultimately be shared problems.”
More positively, 38% of businesses have reviewed the impact of Brexit on their suppliers and are either ‘somewhat reassured’ (23%) or ‘very reassured’ (15%).
Duncan Swift comments: “It’s encouraging that a solid proportion of businesses have checked how their suppliers and customers are preparing for Brexit, and that they are reassured by what they’ve found. It’s still a minority of businesses which are in this position, however.
“It’s all too common for an otherwise successful business’s financial health to be undermined by customers or suppliers running into trouble. Previous research we have carried out showed that more than a quarter (26%) of UK companies suffered a hit to their finances following the insolvency of a customer, supplier or debtor in the previous six months.”
“It’s really important that businesses seek qualified, impartial expert advice if they are unsure about how Brexit will affect them or their supply chain.”
Small businesses most unprepared; manufacturers most concerned
Over a fifth (23%) of businesses employing up to 49 people said that they hadn’t reviewed the potential impact of Brexit on their suppliers or customers, compared to just 3% of companies employing over 250 people who were in the same situation.
Of the four sectors covered by the research (manufacturing, construction, retail, and services), the least likely sector to have reviewed the potential impact of Brexit on their suppliers or customers was the construction sector (18% of businesses had not carried out a review). By contrast, only 11% of manufacturing companies had not carried out a review.
Of the businesses surveyed, those in the manufacturing sector were most concerned by what they found; 37% were either ‘somewhat’ or ‘very’ concerned, compared to 40% who were ‘somewhat’ or ‘very’ reassured. Companies in the retail sector were most likely to be reassured by their review (46% were in this position, compared to 28% who had concerns).