Thousands of British companies are understood to be restructuring their supply chains in anticipation of hardening anti-China political sentiment.
30 July 2022
British firms are scrambling to severe economic ties with China in the wake of increased political and security tensions between Beijing and the West, an industry leader has said.
The sudden restructuring of supply chains from China could also exacerbate the cost-of-living crisis, Confederation of British Industry (CBI) director-general Tony Danker warned.
Speaking to FT Weekend, he said thousands of companies in the UK were currently engaged in rethinking supply chains in anticipation of hardening anti-China political sentiment.
Mr Danker warned that the UK needed to find new trade partners and rekindle old ones – such as the EU – if China is removed. If not, corporate supply chains “will be more expensive and thus inflationary” and Britain’s trade strategy will be redefined.
“If the political experts and security experts are right, we are all going to need to be good friends again,” he told the newspaper.
“Every company that I speak to at the moment is engaged in rethinking their supply chains… Because they anticipate that our politicians will inevitably accelerate towards a decoupled world from China.”
The CBI boss said Britain needed “new strategic alliances in the world. In Washington, he added, the need for companies “to build “resilience” in preparation of a divorce from China was “all they are talking about”.
“It doesn’t take a genius to think cheap goods and cheaper goods may be a thing of the past,” Mr Danker said, warning a price-rise was inevitable.
The warning from the CBI chief about Britain’s economic reliance on China comes amid the Conservative candidate race for No 10 in which the issue of China has featured heavily.
Earlier in the week Liz Truss and Rishi Sunak clashed over who would take the toughest stance on China in the battle to become the new prime minister.
Both contenders accused each other of pursuing a closer relationship with China while pledging to stand up to the threat posed by the superpower to Britain’s national security and economic security.
Ms Truss accused her rival of “pushing for closer trade relationships” while Mr Sunak said “Liz has been on a journey” to get to a point where she opposes closer ties.
In response to China being such a focal point in the Tory race, Mr Danker told FT he was happy to see both candidates appearing to grasp the need for a positive business strategy.
However, he also voiced concern that climate issues and opportunities of economic growth in the green sector were not being taken seriously. The green agenda was being treated derisively as a “woke” issue, he said.
“The candidates need to be careful. I understand the politics but being a green sceptic now is eroding the platform you will have as prime minister for what we think is the biggest economic and business opportunity for the UK.”
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