Supply chains 'at breaking point for 42 % of UK engineering companies'

More than 40 % of UK engineering companies say their supply chains are "at breaking point" and uncertainty around Brexit has made imports much more expensive, a new report has said.

The report, based on YouGov figures and sponsored by funding network Urica, says 40% of engineering businesses suffered a break in their supply chains in the last 12 months, causing disruption to half of them. Over six months, the average working capital requirement for engineering businesses increased from 35 days to 49, meaning it takes longer for them to turn liabilities into cash.

The uncertainty surrounding Brexit is playing a large part in the problem, said Engineering Industries Association president Sir Ronald Halstead. “The dramatic fall in sterling has made the cost of imported components and raw materials significantly more expensive,” he said. “Add to that potential disruption of supplies from EU countries and businesses begin holding more cash while investigating alternative solutions.” Spending on imports has increased from 13 % to 20 % of turnover in just six months.

Despite the “stretched and fragile” supply chains, 78 % of businesses expect an increase in turnover over the next year. Forecasting growth while relying on a “creaking” supply chain is a dangerous strategy and puts business plans at risk, said Lindsay Whitelaw, chair and founder of Urica. “What’s more, the longer we have uncertainty around Brexit the weaker engineering supply chains will become,” he said. More cash is needed in the supply chain for businesses to grow and diversify, he added.