Santander: UK businesses shift away from China as tensions flare
UK businesses are moving away from China as risks mount amid flaring geopolitical tensions.
Over half of firms are taking steps to bring their supply chains closer to home, with one in five having already relocated their network closer to the UK.
The moves come amid questions over China’s dominance in the supply chain, with data from banking giant Santander suggesting around 40 per cent of UK firms have relied on the nation for a part of their supply since 2023.
China has served as an efficient source of goods for businesses due to its comprehensive industrial system, including cheap and specialised labour and manufacturing capacity.
The country also maintains the world’s busiest port – the Port of Shanghai – which was the first venue to exceed 50 million TEUs (twenty-foot equivalent units) annually.
But as tensions rise between Western nations and China, it has led to concerns the latter would weaponise its dominance in business networks through restricting exports or essential components.
The erratic trade tensions between President Donald Trump and Beijing earlier this year, where hefty tariffs were traded back and forth, led to many businesses re-evaluating their network.
America’s biggest automakers have quietly laid out plans to reorganise their operations with the likes of Tesla and General Motors hitting the brakes on using Chinese-made parts of the cars they sell in the US.
Tesla has moved aggressively to remove Chinese suppliers from operations, calling on its suppliers to stop using components from the country.
Meanwhile, General Motors – the US’ largest car company by market share – has given suppliers a “deadline” to find new suppliers.
Jane Galvin, head of corporate clients at Santander UK, said: “Ambitious UK businesses are determined to grow, but they face a challenging mix of geopolitical instability and weak domestic growth.”
In the UK, tensions have spiked in recent months with reports Chinese tech firms, which were banned on national security grounds, had lobbied for Beijing’s new super embassy in London.
US and South East Asia benefit from UK diversification
The United States continues to lead the pack as the most attractive export destination for UK firms, with more than a third identifying it as a key market.
This comes after the UK was the first country to broker an agreement with the White House after Trump’s ‘Liberation Day’ tariffs.
A flagship point of the deal included tariffs on cars being slashed to ten per cent for a quota of 100,000 vehicles, which the Society of Motor Manufacturers and Traders (SMMT) said provided relief.
Beyond the US, Galvin said China’s neighbours were benefitting from the diversification.
“As some move supply chains away from markets such as China and closer to home, others are exploring new emerging markets in countries such as Vietnam, Thailand and Malaysia,” she said.
Interest in Southeast Asia nearly doubled since Spring 2025, surpassing 12 per cent, whilst Central Asia was at nine per cent.