‘Vulnerable’ Britain should build three-month stockpiles of medicine and vital goods if global supply chains are threatened by war, experts warn
The UK could “shut down” within months if a conflict breaks out between the US and China over Taiwan, a report has warned.
Britain’s dependence on China and other Asian countries for manufacturing, which could be threatened by disruption to global supply chains caused by conflict in the Indo-Pacific, is an “economic-strategic vulnerability”, the research by think tank Policy Exchange says.
The report calls on the Government to implement a new supply chain strategy for the UK, cutting across several Whitehall departments.
It would aim to brace the country for renewed tensions between the US and China, instability between Europe and Russia over Ukraine, and the impact of Trump administration tariffs on Beijing and other major exporters to the UK.
Policy Exchange says that the UK, as a small island state largely reliant on imports and now out of a major trading bloc in the EU, must quickly assess its international supply chain vulnerabilities – and feed this assessment into economic and military policy.
This should include stockpiling of critical materials that could sustain the UK population for three months, the report says – including pain and anti-inflammatory medicine, critical minerals, semiconductors and microchip materials.
The Covid pandemic and the war in Ukraine exposed the vulnerabilities of supply chains in food, pharmaceutical, energy and manufacturing sectors which still reverberate to this day, it adds.
In a foreword, the UK’s former chief trade negotiation adviser, Sir Crawford Falconer says: “These developments have brought home the essential fragility of international supply chains particularly evident in such sectors as food, pharmaceuticals, industrial manufacturing and energy technology.”
US officials have warned that China is preparing to blockade Taiwan before the end of the decade, while Trump’s ramping up of tariffs against Beijing has triggered a wave of tariffs against the US.
Policy Exchange argues: “The Second Trump administration has already signalled a significantly more aggressive trade policy that integrates tariffs into broader political moves.”
Warning of what could happen in the event of a “cross-strait conflict” between China and Taiwan, the report says: “The UK economy will rapidly slow down, tipping into a recession within weeks as prices rise, transport becomes difficult, shipping costs increase, and the general transport of goods is disrupted.
“The danger, however, is that absent proper preparation, a significant depression would be the least of British issues.
“If the UK lacks the ability to replace lost food, energy, transport, medical, and manufacturing/repair capabilities, the country is likely to shut down over several months. Transport will halt, food prices will grow, and repairs to broken machinery will become increasingly difficult.”
The report says the over-reliance of the UK on Chinese manufacturing, together with a “limited labour force capable of populating a revitalised manufacturing sector, makes it unlikely that the UK can shift entire sectors”.
But it says that Britain, alongside its allies and neighbours, can prepare for greater resilience through stockpiling of critical materials.
The UK should also address the supply of tools needed for British manufacturing and repair – which are currently largely produced or sourced via Asia.
China controls 29 per cent of the international machine tools market, while Japan has 14 per cent. Any disruption due to conflict in the Indo-Pacific would be “severely dangerous for limited British manufacturing and repair capacities”.
In the foreword, Falconer adds: “Major global trade disruptions have occurred at an accelerating rate over the last half-decade. The Covid-19 pandemic derailed the global economy for two years.
“Immediately after, Russia invaded Ukraine, violating the international commitment to sovereignty that has held in Europe, in broad terms, since 1945.
“The Houthis continue to menace global shipping in the Red Sea. Europe is under pressure, facing an energy crunch on the continent, and trade frictions are intensifying.
“These developments have brought home the essential fragility of international supply chains particularly evident in such sectors as food, pharmaceuticals, industrial manufacturing and energy technology.”
As well as creating emergency stockpiles, the government should create a supply chain cell inside the Cabinet Office which can cut across several Whitehall departments, Policy Exchange suggests.
Supply chain vulnerabilities should also be looked at in both the Strategic Defence Review, which is due to be published this spring, and the National Security Review expected later this year.
The Government should also explore the potential for a central and eastern European supply chain corridor that would include Finland, the Baltic States, Poland, Romania, Bulgaria and post-war Ukraine, the report adds.