Many UK manufacturers remain fearful about the risks of using foreign firms in their supply chain despite the boost it could give them, according to new research released by Barclays.
The bank’s survey of more than 200 manufacturers across the UK revealed an emphasis on quality and loyalty, with businesses looking to each other for support rather than go into overseas markets
A combined 61% source commodities and components from UK firms against 39% offshore, while 53% producing goods that are sold to the UK end user or use as components in UK production. Among those that source inputs offshore, 32% do so from China and 19% from Germany.
Some 36% said the key deterrent for trading outside the UK was simply that they prefer to source from the UK. This is followed by currency risk (19%), with 11% fearing goods or payment may not be received.
Barclays Corporate Banking’s head of Bristol, Fraser MacKay, said: “There is a clear sign of patriotism amongst UK manufacturers as values, loyalty and confidence hold firm with proximity being seen as a key driver.
“Given the current economic climate, a focus on domestic strategies and procurement is understandable. However manufacturers must not be afraid to play a lead role on the global supply chain stage.”
Quality emerged as a defining factor in choosing suppliers and winning business with 40% of manufacturers putting this first when selecting a supplier, followed by 33% who chose on price. This was underlined by the fact that, when asked what wins them business with the key firms they supply, 57% stated ‘quality’ with just 16% saying ‘price’.
Transport costs are also impacting on manufacturers’ decisions when choosing suppliers and where they supply. Almost two thirds (65%) said cost was influencing their supply chain decision making with a further 11% saying their decisions are being heavily impacted.
Despite the harsh economic climate, there is a confidence amongst UK manufacturers when it comes to stability and security of their place in the supply chain, the survey showed. When asked how they would describe the level of contractual security they enjoyed with the companies they supplied, 51% believe their customer relationships to be stable in the short term while a third see stability for the foreseeable future.
Mr MacKay added: “Self confidence and traditional values of quality appear to be key drivers behind UK manufacturers’ supply chain strategies. For UK manufacturers that are able to fully grasp the opportunities and risks related to global trade, there is undoubtedly a competitive advantage.”
