The National Preparedness Commission has launched a new report on UK industrial resilience.
Supply chain shocks, driven over recent years by geopolitical events and the COVID-19 pandemic, have revealed the vulnerability of the UK to disruptions of trade. An increasingly volatile international environment, overlaid by growing climatic and cyber threats, points to an ever more fragile situation.
This report considers a scenario involving multiple hybrid shocks resulting in a severe impact on the UK’s import/export flows.
This is an area of key vulnerability as the UK has a heavy reliance on imported materials to make most of its critical items – such as defence equipment, electronics, pharmaceuticals, energy and even food.
Once the bastion of world manufacturing, the UK is now heavily dependent on imported goods to supply almost every part of the economy. The erosion of manufacturing in the UK has been driven largely by a lack of competitiveness and this has accelerated over the last two decades, with most supply chains being significantly hollowed out, leaving very little industrial capability. Key materials required to support the manufacture of electronics, batteries and energy are neither mined nor manufactured in the UK and, under current circumstances, it is not conceivable that they could be on-shored in a commercially competitive way without a clear strategy and significant intervention.
Quite apart from the contribution to rising energy prices, the pathway to Net Zero – and specifically the growing reliance on intermittent renewables – is intensifying this vulnerability both because the technologies rely on imports of raw materials and components, and because uncompetitive energy costs are leading to the rapid contraction of the UK’s remaining production of fossil fuels, which are still, and will remain, critical for energy, transportation and as a feedstock for the majority of industrial materials into the foreseeable future.
Policymakers must not equate a transition to a low carbon economy with an end to hydrocarbon production. As well as being essential to energy security hydrocarbons remain the building blocks for most everyday products from soaps to medicines to electronics and clothes. The loss of manufacturing capability to meet basic consumer essentials as well as more complex products such as batteries and electronics, only results in increased imports to meet demand.
The examples below illustrate the extent of the issues:
This report analyses the resilience of key industrial sub-sectors to a scenario combining a series of crises which significantly disrupts imports into the UK, requiring a high level of national self-sufficiency. It finds that the country’s heavy reliance on imports of materials, with complex supply chains and just-in-time deliveries, coupled with the lack of significant industrial capability to respond in such a crisis, poses significant threat to the UK’s national resilience.
A summary of the impact across key supply chains is shown in the table below, using a RAG (Red, Amber, Green) system to denote severity of the impact.
Source: National Preparedness Commission: https://nationalpreparednesscommission.uk/publications/industrial-resilience-assessing-the-foundations-of-uk-industry/
The Critical Supply Group consists of companies and professionals committed to secure and resilient critical supply chains. CSG is managed by MAP UK & International. For more details, including how to get involved, or to make contact with any of the entities involved, please email info@mapukinternational.com.