CBI chief questions future of UK-China trade as British firms rethink their supply chains

Mon 1 Aug 2022
Posted by: Phillip Adnett
Trade News

China UK Trade Future of relationship

Thousands of companies in the UK are rethinking their supply chains in anticipation of anti-China political sentiment hardening, according to a key business leader.

Confederation of British Industry (CBI) director general Tony Danker has warned that the sudden restructuring of supply chains from China could also exacerbate the cost of living crisis.

Speaking to the FT, Danker said the UK would need to find new trade partners and strengthen ties with existing ones – including the EU – if the west cuts ties with China. Failure to do this could make supply chains “more expensive and thus inflationary”.

Decoupling from China

“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,” he said.

The Guardian reports Danker’s warning that prices would inevitably rise as a result of this.

“It doesn’t take a genius to think cheap goods and cheaper goods may be a thing of the past,” he said.

China trade

According to the Office for National Statistics, in 2021 the UK imported £63.6bn of goods from China – 13.3% of all goods imports – making China the UK’s largest importing partner.

The China Britain Business Council (CBBC), a trade promotion body representing more than 400 organisations, estimates that exports to China grew to £18.1bn in 2021, reports Business Live.

Exports of essential goods to China (excluding crude oil and gold) were up 11% in 2021, compared to a much weaker recovery of comparable exports to the UK’s other major trading partners - US (1.7%), EU (2%), and Japan (1.7%).

China was also the UK’s sixth-largest exporting partner in 2021.

China hawks

Tory leadership hopefuls Liz Truss and Rishi Sunak have clashed over who would be toughest on China, reports Politico.

As foreign secretary, Truss has carefully positioned herself as an outspoken critic of China, calling for the UK to develop a “network of liberty” with other democracies.

As chancellor, Sunak was more eager to build closer economic ties with China and this year sought the resumption of high-level government talks.

Political manoeuvring

In a televised BBC debate last week, Truss accused Sunak of seeking closer ties as recently as last month, after Sunak had previously said the Foreign, Commonwealth and Development Office had “rolled out the red carpet” to Beijing under Truss.

As reported in the IOE&IT Daily Update, neither candidate was willing to answer a question on whether they would be willing to damage trade relations with one of the UK’s biggest trading partners.

Former Tory leader Sir Iain Duncan Smith has backed Truss to replace Boris Johnson as PM, saying her stance on China was critical to his support, reports the Express.

Former leadership contender Tom Tugendhat – who formed the China Research Group to focus on the challenge of a more powerful China – has also endorsed Liz Truss, according to the BBC.