The growing popularity of UK ‘nearshoring’ and ‘onshoring’ – Does it spell the end for extended supply chains?

Factoring in cost-effectiveness within the supply chain has long been understood by all businesses importing their goods for manufacturing processes, or to service their customer’s needs. However, since the global pandemic, the war in Ukraine, and rising energy costs, businesses seem to be valuing resilience, flexibility, and sustainability in their international supply chain more than straightforward lower-cost considerations.

Since the pandemic the average cost of shipping goods in containers has risen from an average of £1,100 per container to £12,000. Additionally, Chinese wage costs have risen over 200% in the last few years, raising costs of Chinese produced goods. It is little wonder therefore that businesses with extended supply chains have chosen to explore the possibilities of ‘near-shoring’ and ‘on-shoring’ their goods and raw materials to ensure a consistent and resilient supply of those goods as a way of weathering the vagaries of extended and potentially vulnerable international supply chains.

Despite the possibility of increased costs in sourcing goods locally and/or to store their products either near or at their marketplace, some businesses see this as a better way to ensure certainty in the flow of raw materials and products. Subsequently, they can retain their market share and their customers – even in times of international disruption in other economies.

This approach also adds a sustainable element to the business and fits in with many companies’ ethical and philosophical desire to be more responsible in their logistical and product-sourcing operations.

However, since the post-Brexit changes to how UK businesses interact with their EU customers, many companies have seen warehouse space in the Low Countries of the EU come at a premium cost with limited or little space remaining. Likewise, the warehouse space of the South-East of England is also exerting some space vs. demand pressure. Helpfully, the Freeport initiative, the use of customs special procedures, and the stock of storage space in other parts of the UK seems to assist these recent ambitions to alter current and established supply chains. Particularly, the Freeports initiative and the use of Customs Warehouses (Bonds) can be useful in respect of items that need to be held in duty suspension until required at the final point of sale, or for items that need to be processed under customs control before being re-exported to overseas customers. This can sometimes avoid the unsavoury prospect of businesses incurring ‘double customs duty’ levied on goods considered not of EU origin and not subject to any other Free Trade Agreement.

It is clear that the default position of ‘just in time’ supply chains transforming to a ‘just in case’ inventory management, with the items stored near or on-shore, seems to be attractive and gaining traction amongst companies who saw their business suffer and experience loss of trade and increased costs in the past few years – due to no fault of their own. However, such a move is not without its costs and still requires careful thought. If managed correctly then the security and sustainability of a company’s supply chain could be greatly improved.

Would you like to know more?

If you require any assistance with reviewing your existing supply chain or wish to discuss how Blick Rothenberg may be able to help you with any aspect of customs duty or importing and exporting your goods, then please speak to your usual Blick Rothenberg contact or Simon Sutcliffe using the details on this page or the form below.