You’ll no doubt remember the recent disagreement between Tesco and Unilever, who fell out about raising consumer prices as a result of the weakness of post-Brexit Sterling against the Euro. Unilever stated it would need to raise UK prices to balance out rising supply chain costs from overseas, with Tesco countering the action by removing all of Unilever’s products from their stores. A bold move considering the popularity of the manufacturer’s many brands.
In October, the pound fell below €1.10 for the first time since March 2010, and since June’s UK EU referendum, the pound has been significantly weaker against other major currencies too, most importantly the US dollar. This is having a negative influence on businesses with procurement based in the UK that use global supply chains, as Sterling is buying less of the goods and services it once did.
However, these circumstances may not be all bad news. With the unfavourable exchange rate, many domestic-based businesses may well consider sourcing their goods and materials from within the UK. Whilst this may not have been the cheapest option in the past, in today’s climate it could well be a sensible way to mitigate the risk of the falling purchasing power of our pound in overseas markets. In turn, we could see a positive impact on UK manufacturing, helping to resurrect the ‘Buy British’ standards of the past.
The mirror image will be for EU-based organisations, with the stronger Euro triggering more supplier sourcing activity pointed towards the UK, creating great opportunities and opening new markets for UK industry.
So, from a procurement perspective we could see an upswing in strategic sourcing events as the ‘buy British’ mantra spreads. Although the pressure will be on to quickly protect the bottom line or capitalise on cost saving opportunities, it will still be essential to make sure new suppliers are still onboarded with all the necessary due diligence to ensure supplier compliance and effective risk management. With a potential ‘new broom’ in any particular spend category can also come a great opportunity for procurement to make a mark and add value. Procurement can lead and advise the business on matters of price negotiation, eSourcing, contract and supplier management, all to make sure new supply partners are being onboarded in the best possible way to take advantage of the Brexit silver lining.