Perfect Storm Of Supply Chain Issues Threatens A Winter Of Discontent, Says UK Mid-market

As major disruption to supply chains continues across the country, Grant Thornton UK LLP’s latest Business Outlook Tracker finds that a perfect storm of temporary and structural supply chain challenges, from changing Brexit regulations to production delays, are threatening to create a winter of discontent for UK businesses and consumers alike.

Over the last few months, the UK has been facing severe supply chain disruption 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.

The research finds that there are a range of problems contributing to the disruption, but the main issues cited by respondents who said they have been negatively affected were found to be: Delays from source production facilities (23%), Changing rules and regulations from Brexit (21%) and International delays in shipping (21%)

While not ranked individually within the top issues, collectively, over half of respondents who said they have been negatively affected said problems relating to a lack of available workers was a major blocker. Including shortages in skilled (18%) and unskilled (19%) operators, and shortages in transport workers, including heavy/large goods vehicle drivers (19%), and specialist transport workers (18%).

Rachel Engwell, Yorkshire-based partner and head of tax for the North at Grant Thornton UK comments: “The latest survey results confirm what we’ve all been witnessing in our everyday lives – empty supermarket shelves and queues at petrol stations – that the critical fourth quarter for our economy will be severely impacted for some sectors.

“This winter is therefore likely to test, once again, the resilience of business plans and contingency measures. It’s a very challenging scenario. We have seen examples at docks where container turnaround time is slower due to additional Brexit regulations and container pick up is slower due to a lack of drivers. It really is creating a perfect storm and the combination of the two is exacerbating delays and having substantial knock-on effects further down the supply chain.

“There is also the potential for things to get worse before they get better. Many businesses may not be aware that they are currently benefitting from a range of phased Brexit implementation measures, including grace periods around rules of origin. With this set to change from 2022, 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.

Rachel adds: “However, as we witnessed during the pandemic, businesses in Yorkshire have proved to be incredibly resilient, which gives me confidence looking ahead to 2022. The recent growth of the TMT sector in our region – particularly fintech – is just one reason to remain positive.”

Ongoing supply chain issues are also found to be impacting profit levels across the mid-market. Over one third (39%) cited that they are facing reduced profits due to the continued disruption. Profit expectations over the next six months across the mid-market have also dropped -18pp compared to Grant Thornton’s last Business Outlook Tracker survey in August.

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

Rachel concludes: “Businesses are likely to be looking for reassurance that the issues disrupting their supply chains can be resolved, and swiftly. As we look ahead to the Autumn Statement next week , we need to see affirmative action from Government to help businesses navigate through these challenges.”