Political Tensions Push British Companies Away from China

British businesses have started to cut their ties with China following Beijing’s political tensions with the West. The move will likely increase inflationary pressures. The companies have been contemplating over changing their supply chains because they anticipate an eventual decoupling from China.

China was Britain’s biggest supplier of goods in 2021, accounting for 13% of the total. It was also the sixth largest destination for British goods exports.

However, British security concerns have risen in recent years, fueled by disagreements with China over Hong Kong and other issues. Last week, the head of Britain’s foreign intelligence service Moore said China had become his top priority.

Britain has also increasingly blocked Chinese takeovers of companies on national security grounds.

Foreign Secretary Truss and former finance minister Sunak, the two remaining candidates for the Conservative Party leadership, both have said they intend to take a tougher stance on China.

Another factor for British companies becoming wary of Chinese supply chains has been the U.S. concern about China. But looking for other suppliers will be more expensive and thus inflationary.

British inflation hit a 40-year high of 9.4% last month, partly because of the surge in energy prices caused by Russia’s invasion of Ukraine.

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