News / UK firms should 'diversify sourcing' amid post-Brexit customs confusion

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UK businesses should consider diversifying their sourcing from a single market to suppliers in Africa, the Americas and Asia, according to a new report.

The report, by the University of Birmingham, came after the government on Friday announced the latest in a litany of delays to post-Brexit customs processes, with new rules for parcels moving between Great Britain and Northern Ireland pushed back to next year.

The report notes marked declines in the flow of goods between the UK and the EU since the 2020 introduction of the Trade and Cooperation Agreement (TCA).

It claims: “The TCA has caused severe disruption in UK-EU supply chains, particularly in consumer and intermediate goods. Smaller EU economies have been more affected by reduced UK export varieties, while larger ones have seen smaller declines.”

The report details declines in UK exports of 27% and of 32% in imports between 2021 and 2023.

And while calling for policy interventions, including measures aimed at “mitigating the TCA’s adverse effects, reconfiguring supply chains and supporting firms in adapting to new trade barriers”, it also suggests a need to move away from a single market.

“Reduction in trade scale due to Brexit, particularly in sectors burdened by higher trade barriers, has led to decreased efficiency and a loss of global competitiveness,” it says.

“This, at least partially, explains the wider decline in UK exports outside the EU. The disruption of global value chains in sectors such as footwear is particularly evident, with corresponding declines in both exports and imports.”

It suggests UK businesses need to reduce dependence on any single market by seeking out suppliers in Africa, the Americas and Asia.

The study follows a report by accountancy firm Grant Thornton, which found 89% of Indian business leaders surveyed named the UK as their preferred international destination for investment.

It described the UK as a “key growth market” for mid-level Indian businesses that cited its “strong infrastructure”, “strong innovation ecosystem” and “digital competitiveness”.

Nevertheless, said Anuj Chande, head of Grant Thornton UK’s South Asia Business Group, work was needed to capitalise on this perception by reducing some of the barriers to entering the UK market.

“Streamlining regulatory processes and simplifying compliance could help to alleviate operational burdens for Indian businesses looking to the UK,” he explained.

Given the disruption from efforts to realign the UK and the EU single market in the wake of Brexit, the opportunities coming from developing countries presents something of a ‘sliding doors’ moment for the country’s business sector.

Certainly, the latest delay to the Windsor Framework – the post-Brexit legal agreement between the EU and UK which adjusts the operation of the Northern Ireland Protocol, has provoked the usual mix of nervousness and opportunity in the logistics sector.

Nichola Mallon, head of trade at Logistics UK, said the announcement had brought relief to the UK logistics sector, noting movement between GB and NI was complex, and had been impacted by the change of government.

“It is heartening to see that the concerns of logistics businesses have been taken into account by the government and this announcement is welcome,” she said.

“However, for this delay to be productive, we need to see a step change in government’s communication with, and support to, traders and hauliers moving goods from GB to Northern Ireland.”