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Supply chain fears: There is the potential for things to get worse for businesses before they get better, warns report

A ‘PERFECT storm’ of supply chain challenges ranging from changing Brexit regulations to production delays, threaten a winter of discontent for UK businesses and consumers alike, a new report warns.

As major disruption to supply chains continues across the country, professional services specialist Grant Thornton ‘s latest Business Outlook Tracker concludes that a range of problems are contributing to the disruption but the main issues are delays from source production facilities, changing rules and regulations from Brexit and international delays in shipping.

More than half add that problems relating to a lack of available workers is a major blocker, including shortages in skilled and unskilled operators, and difficulties in recruiting heavy and large goods vehicle drivers and other specialist transport workers.

The UK has faced severe supply chain disruption in recent months resulting in delayed deliveries and increased prices. One in five of the 605 mid-sized businesses surveyed said they are finding it harder to move products around the UK and across the world because of the ongoing issues. 

James Brown, Grant Thornton’s partner and practice leader in the East of England, said: “Few industries are immune to the challenges being thrown up by the supply chain issues but unfortunately the East of England is particularly vulnerable due to the fact that one of its main market sectors, agriculture, is among the hardest hit. 

“Every day seems to bring a new headline highlighting a new problem, ranging from fruit rotting on farms, pig farms not being able to move animals and dairy products going undelivered.” 

In addition, inflationary pressures resulting from the supply problems mean that food and beverage businesses are experiencing an unpleasant combination of challenges from many different directions, he added. 

“It really is a perfect storm of factors that are combining to have substantial knock-on effects across the supply chain. There is also the potential for things to get worse for businesses before they get better.”

Businesses may be unaware that they are benefiting from a range of phased Brexit implementations measures, including grace periods around rules of origin. These come to an end from next year, however, when further border measures come into force.

“Businesses need to ensure that they are prepared and ready to avoid a shock and even further disruption,” said Mr Brown.

Ongoing supply chain issues are hitting profit levels across the mid-market. A total 39% of respondents said they face reduced profits due to the continued disruption. Profit expectations over the next six months across the mid-market have also dropped by 18% compared to Grant Thornton’s last Business Outlook Tracker survey in August. 

As businesses continue to build their recovery from the pandemic, 26% of businesses also cited supply chain disruption as a top threat to their growth in 2022. 

Mr Brown said: “We are enduring a tough period where the panic buying of fuel, food and even Christmas toys has become part of our national dialogue, along with concerns about the rising costs of energy and consumer goods. 

“Business confidence is clearly fragile, as they continue to try to recover from the pandemic but face an accumulation of challenges. 

“Businesses are likely to be looking for reassurance that the issues disrupting their supply chains can be resolved, and swiftly. We need to see affirmative action from government to help businesses navigate through these challenges. 

“And businesses will need to continue to draw on the agility and resilience they have already demonstrated so well over the past 18 months to safeguard their business through the winter and into 2022.”

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