A new report from Accenture has found that supply chain challenges arising from the COVID-19 pandemic and Russia’s invasion of Ukraine could result in a potential €920 billion cumulative loss to gross domestic product (GDP) across the Eurozone by 2023. The potential loss equates to 7.7% of the Eurozone GDP in 2023.
The report is based on research conducted in collaboration with Oxford Economics. The analysis covers the Eurozone, which consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.
According to the report, supply chain disruption related to COVID-19 cost Eurozone economies €112.7 billion in lost GDP in 2021. Before the war, the lack of material supplies, breakdowns in logistics and inflationary pressures were already undermining the economic rebound in Europe, with resurging demand and precautionary hoarding overwhelming supply chains.
These figures come as one-in-three companies in Ireland have reported that they are already losing business due to the current spell of elevated inflation. This is according to figures from the recent Accenture / S&P Global Ireland Business Outlook, which also showed that the impact has been particularly felt in the manufacturing sector, where 43% of firms indicated that they are losing business due to inflationary pressures, compared with 27% in the service sector.
In response to sharply rising costs, 43% of Irish firms have been looking for opportunities to reduce operating expenses through investment in technology in the past 12 months, with more than half (54%) intending to invest in technology over the coming year to try and reduce operating expenses. Reduced competitiveness, efforts to invest in training to boost productivity and investment in automation were all expected by more than 30% of companies.
Commenting on the research, Strategy and Consulting Lead at Accenture in Ireland, Antony Keane said, "Ireland, and in particular Europe, is at the dawn of a new era: a new energy system, new economic cycles and a new geopolitical order. The decade ahead must herald a fundamental rethinking of supply chains for competitiveness and solving these supply chain and operational issues will be critical to Irish competitiveness and growth."
He added, "To contend with an uncertain future and build long-term value, Irish businesses need to redesign their supply chains around resilience, relevance, and sustainability. Success may ultimately depend on how well leaders adapt to the demands of this new, testing environment. More than ever, their resolve will be critical."