Global trade volatility is being treated as structural rather than cyclical. For UK and EU SMEs, supply chain resilience is now being tested by tariff shifts, regulatory tightening, and transport disruption, often in the same quarter.
UN Trade and Development has reported that global tariffs rose in 2025, with manufacturing most affected, and that frequent policy shifts are increasing uncertainty and disrupting supply chains.
At Davos 2026, the message on resilience was not softened. The World Economic Forum’s trade takeaways stated that the most resilient strategy is to diversify, because over-reliance on one partner is a vulnerability. It also argued that digital tools can make trade faster and cheaper, and can act as powerful equalisers for SMEs when deployed well.
However, diversification is not a slogan. A resilience premium is paid at the point of design, through supplier optionality, contract terms, inventory buffers, and better visibility. The OECD has warned that aggressive relocalisation can be economically costly and does not consistently improve resilience, while import concentration is rising in ways that increase vulnerability to shocks.
This is why diversification should be treated as portfolio construction, not as a blanket reshoring campaign.
Why Diversification Has Become Defining
This underscores the growing role of supply chain design as a strategic discipline for SME survival. UN Trade and Development has noted that tariffs rose in 2025, and that policy volatility is expected to continue as tariffs are used to pursue industrial and strategic objectives.
OECD modelling shows that attempts to relocalise supply chains could reduce global trade by over 18% and global real GDP by more than 5%, while resilience benefits are not consistently delivered. The simplistic conclusion is that resilience is not achieved by retreating, but by designing options.
This macro logic is echoed by the IMF. An IMF working paper has found that diversification can mitigate shocks, but that a resilience efficiency trade-off is present. Diversification is most valuable when targeted at upstream imports more exposed to shocks, where reconfiguration is slow. For SMEs, this means the resilience budget should be spent where switching costs and downtime are highest.
Practical Resilience for UK and EU SMEs
Diversification begins with visibility. A supplier base cannot be expanded intelligently until concentration is understood. Mapping should prioritise inputs by margin impact, not just spend, as critical vulnerabilities often lie in low-cost items like specialist finishes, components or packaging.
A second concentration map should assess logistics: reliance on a single forwarder, shipping lane, port, or bonded warehouse can expose a business to disruption long before a supplier fails.
Treat dual sourcing and nearshoring as staged options
Dual sourcing typically delivers the best resilience return for SMEs. A second supplier is not needed for everything. Only for inputs that are upstream, substitution resistant, or slow to qualify. This aligns with the IMF’s emphasis on targeted diversification. Nearshoring should be used strategically, especially to compress lead times or improve border predictability. It is often most effective when applied to critical inputs, final assembly, or late-stage customisation that helps reduce inventory risk. This reflects renewed interest in control and resilience. While not a universal model, it shows how nearshoring can support both operational flexibility and supply chain strength.
In the UK, premium manufacturing is showing early signs of return. The Financial Times reported that knitwear brand John Smedley has reopened production for third-party manufacturing at its Derbyshire site, with Daks among the first to restore some production to the UK. This reflects renewed interest in control and resilience. While not a universal model, it shows how nearshoring can support both operational flexibility and brand integrity.
Reintroduce buffers where they matter most
Inventory buffers should be used selectively, not spread indiscriminately. A simple segmentation can help guide decisions. Some inputs, where even a brief disruption causes unrecoverable loss, should be prioritised.
These are the “must never stop” items, and buffers should be concentrated in these areas. Conversely, for inputs that can be easily substituted, the smarter approach is to switch rather than stock.
Make scenario planning a monthly discipline
Scenario planning must become habitual. Two simulations are essential. A tariff scenario should model duty changes by product line, converting them into landed cost impacts and pricing decisions. It should be decided in advance where absorption, repricing, or substitution is triggered.
A delay scenario should model two-, four-, and eight-week disruptions, quantifying the effects on service levels, customer penalties, and working capital strain. The World Economic Forum noted at Davos 2026 that tariff unpredictability remains one of the clearest disruptors to trade, while security planning and scenario modelling were identified by supply chain leaders as fundamental to readiness.
Resilience Is Strategy
A resilience audit should be treated as a strategic first step. This should include an assessment of supplier concentration, lead time risk, supply chain exposure, market access rules. It is becoming the sharpest edge in a slowing, fragmented world economy. For UK and EU SMEs, the challenge is not simply how to survive volatility, but how to design systems that grow stronger with each disruption. This is no longer about reacting to shocks. It is about having the foresight to turn disruption into momentum.
Diversification is a strategic design. Businesses that invest in supplier optionality, faster lead times, flexible sourcing, and better data will not only reduce exposure. They will unlock agility, access new markets, and command greater control over pricing and positioning.
Companies that lead in resilience will look different from those that led in efficiency. The old model was built for predictability, while a new one will be built for friction.
A resilience audit should be treated as a strategic first step. This should include an assessment of supplier concentration, lead time risk, exposure to market access rules, and the design of a six-month execution plan. The aim is not to build a perfect system. It is to build one that can pivot, adapt, and win time under pressure.
“SMEs that future-proof their supply chains will outperform rivals who build for efficiency alone.”
NorthStar Consulting can help your SME strengthen supply chains, build credibility, and scale sustainably across the UK, EU, and global markets.
Contact us for more focused insights and an audit of your current logistics strategy.
