Global supply chain risk grew to a record high at the end of 2016 as the CIPS Risk Index, powered by Dun & Bradstreet, rose to 82.64, from 79.14 at the end of 2015. The figures put global supply chain risk at the highest level in 24 years following a year in which the pace of globalization appeared to slow.
The Index, produced for the Chartered Institute of Procurement & Supply (CIPS) by Dun & Bradstreet economists, tracks the impact of economic and political developments on the stability of global supply chains. A combination of economic nationalism, rebounding commodity prices and the growth of a burgeoning Chinese middle class is making long international supply chains a more risky prospect while there has been an average of 22 new trade restrictive measures a month in the World Trade Organisation’s latest report.
The upward trend in supply chain risk is clearest in Western Europe, where contribution to global risk rose to 30.681 in Q4 from 30.048 in Q1. Amid sluggish growth across developed and emerging market economies in Q2, the UK’s vote to leave the EU at the end of June heightened global supply chain risk for the rest of the year. Supply chains in the UK were hit by a depressed pound which followed the Brexit vote in June. This pushed up the cost of imports, leading to some early conflicts in Q3 between retailers and their suppliers over who should shoulder these costs. The increasing likelihood of a ‘hard’ Brexit, and the UK’s departure from the single market, will add further disruption to supply chains throughout Europe.
In addition to the UK’s vote to leave the EU, there has been a wider revival of interest in trade restrictive measures across Europe. Elections across Europe in 2017 are expected to see gains for populist parties with France’s National Front, Italy’s Five Star Movement, the Freedom Party in the Netherlands and the German Alternative for Germany all placing Euroscepticism and restrictive trade measures at the centre of their policies.