Home Business News UK order volumes crash to three-year low as global trade activity slows

UK order volumes crash to three-year low as global trade activity slows

by LLB Reporter
19th Apr 23 12:03 pm

UK supply chains faced a tough start to the year as ordering activity fell to levels not seen since the height of the pandemic.

Tradeshift’s Q1 Index of Global Trade Health showed total trade activity across UK supply chains fell at the beginning of the year, finishing Q1 7 points below the expected range. Ordering activity fell to 10 points below the baseline, the biggest quarterly contraction in nearly three years.

“The UK is attempting to implement supply chain reconfiguration at massive scale, but they’re doing this on top of processes and infrastructure that simply aren’t built for change,” said Christian Lanng, CEO of Tradeshift.

Globally, retail supply chains were left to count the cost of a post-pandemic inventory glut at the start of 2023. Trade activity across the sector dropped 12 points below the expected range in Q1, a two-year low. Demand for transport and logistics capacity also remained low, at 9 points below the baseline, amid signs of a broader economic slowdown.

Total transaction volumes across all sectors fell to 5 points below the expected range, marking the fifth consecutive quarter that global trade activity has remained in contraction territory. New invoices from suppliers fell sharply in Q1 off the back of a steep decline in order volumes over the previous two quarters.

“Large buyers are coming out of a nasty bullwhip cycle”, said Lanng.

“We’ve seen orders fall consistently over the past six months as organizations attempt to rebalance inventory levels. Order volumes picked up momentum in Q1, but in the short term, we’ll see a liquidity gap opening up that will hit supplier cash reserves. With the cost of borrowing rising, businesses are looking at ways to monetize new orders and turn them into cash faster. We’ve seen a spike in demand for services such as invoice financing.”

US trade activity mirrored the global pattern. Transaction volumes tracked 6 points below the expected range, primarily due to a steep decline in supplier invoices. A solid recovery in ordering activity during the quarter hinted at a brighter outlook in the months ahead. Order volumes in the US finished Q1 at a year high.

Transaction volumes in China climbed back into the expected range in Q1 for the first time in 21 months following December’s lifting of strict Covid prevention measures. However, supply chain operators will be nervous about the broader global slowdown. Furthermore, China’s dominance of global manufacturing supply chains also faces erosion from accelerating diversification efforts among Western companies. Tradeshift’s latest Index shows trade activity in Vietnam rising five times faster than the global average over the past year. Activity levels in Mexico rose six times faster than the worldwide average during the same period.

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