UK firms are cutting ties with China amid wider tensions, CBI chief says

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British businesses are scrambling to sever economic ties with China in the wake of increased political and security tensions between Beijing and the west, an industry leader has said.

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

Speaking to FT Weekend, he said thousands of companies in the UK were engaged in rethinking supply chains in anticipation of anti-China political sentiment hardening.

Danker said the UK would need to find new trade partners and rekindle old ones – such as the EU – if the west cuts ties with China, and that if Britain failed to do that, corporate supply chains would be “more expensive and thus inflationary” and its trade strategy would be redefined.

“If the political experts and security experts are right, we are all going to need to be good friends again,” he said.

“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.”

The CBI boss said Britain needed “new strategic alliances in the world”. In Washington, he added, the need for companies to build “resilience” in preparation for a divorce from China was “all they are talking about”.

“It doesn’t take a genius to think cheap goods and cheaper goods may be a thing of the past,” Danker said, warning that price rises were inevitable.

The CBI chief’s comments about Britain’s economic reliance on China come as the Conservative leadership race continues, in which the issue of China has featured heavily.

Earlier in the week, Liz Truss and Rishi Sunak clashed over who would take the toughest stance on China.

The contenders to become the new prime minister accused each other of pursuing a closer relationship with China, and both pledged to stand up to the threat posed by the superpower to Britain’s national and economic security.

Truss accused her rival of “pushing for closer trade relationships”, while Sunak said “Liz has been on a journey” to get to a point where she opposed closer ties.

Danker said he was happy to see both candidates appearing to grasp the need for a positive business strategy.

However, he also voiced concern that climate issues and opportunities of economic growth in the green sector were not being taken seriously. The green agenda was being treated derisively as a “woke” issue, he said.

“The candidates need to be careful. I understand the politics, but being a green sceptic now is eroding the platform you will have as prime minister for what we think is the biggest economic and business opportunity for the UK.”

Business Matters Magazine

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