Supply chain challenges could result in the Eurozone’s GDP losing up to €920 billion (or 7.7%) by 2023, according to a report by Accenture.
The potential loss is due to the COVID-19 pandemic and Russia’s invasion of Ukraine.
The report, “From Disruption to Reinvention – The future of supply chains in Europe” explores three possible scenarios for how the war could play out over the coming year, modelling the impact of each scenario on the Eurozone in terms of costs and timelines for recovery.
Before the war, the lack of material supplies, breakdowns in logistics and inflationary pressures were already undermining the post-Covid economic rebound. Russia’s invasion of Ukraine has aggravated what was already a difficult situation.
The report predicts that if the conflict stretches into 2023, it could cost the Eurozone up to €318 billion in 2022 and €602 billion in 2023.
Jean-Marc Ollagnier, CEO of Accenture in Europe, said: “Although expert consensus is that Europe will avoid recession this year, the combination of COVID-19 and the war in Ukraine has the potential to significantly impact Europe’s economy, causing a material deceleration in growth.”
“While before the war some kind of supply chain normalization was expected in the second half of 2022, we now don’t expect this to happen before 2023, perhaps not even until 2024, depending on how the war evolves.”
The report finds that up to 30% of gross profit in the Eurozone relies on functioning cross-border supply chain, illustrating just how much of the economy is vulnerable to supply chain shocks.
Accenture says that supply chains should change to take into account the new reality, becoming more resilient and agile to enable future growth.
For this it recommends improved dynamic visibility, risk identification, and mitigation solutions, as well as better data capture techniques across the value chain.
Kris Timmermans, Accenture’s Supply Chain & Operations practice lead, said: “Companies must move from a just-in-time to a just-in-case approach, diversifying supply bases, planning alternative freight routes, making distribution centres flexible and building inventory. It comes at a price, but it is an ‘insurance policy’ against future shocks.