New research has revealed the emergence of major shifts in globalisation, as companies rush to move manufacturing closer to home to protect against supply chain disruptions while increasingly protectionist policies are breaking the world into trade blocs.
The latest Trade in Transition study, commissioned by DP World and led by Economist Impact, captured the perspectives of company leaders as they navigate the latest disruptions to global trade – from the conflict in Ukraine to inflation and extended covid-lockdown policies in some markets.
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Its key finding is that 96% of companies confirmed they are making changes to their supply chains due to geopolitical events.
The change has been swift. In the space of just a year, the number of companies shifting their manufacturing and suppliers– either to their home markets or nearby – has doubled compared to 2021. This is driven mainly by efforts to reduce costs and the risk of disruption.
But the shifts are not even. While 27% of companies said they were decreasing the length of their supply chains due to geopolitical events such as the war in Ukraine, another 33% plan to expand into more stable and transparent markets.
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Inflation threat
The persistent threat of inflation was cited by 30% of the executives as having the most significant negative impact on trade over the next two years. Inflationary pressures are seen in input costs — from supply shortages – and transport, through high energy costs and shipping capacity constraints.
In a scenario of monetary tightening, companies across Europe, North America and Asia-Pacific anticipate exports to be 1% lower than under a business-as-usual situation due to decreasing production and demand.
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