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More than half of UK firms surveyed recently are seeking greater transparency in their supply chains as regulatory pressures increase the need to make disclosures about environmental and social factors, a report finds.

The number of respondents looking for more insight into their supply chains rose by 12 percentage points to 55% compared to the third quarter of 2023, according to Santander’s latest Trade Barometer.

In a similar vein, 46% are taking action on their “ability to validate materials and processes”, up from just over a third in Q3 2023.

This marks a “heightened focus on visibility” due to more stringent expectations from consumers, investors, regulators and employees, Santander says.

Regulation such as the US’ Uyghur Forced Labor Prevention Act and the EU’s Corporate Supply Chain Due Diligence Directive has stepped up the need for companies to have far greater oversight over their supply chains in recent years.

Almost three in four businesses report growing pressure from customers to meet ESG requirements, the bank says.

“Businesses are embracing ESG considerations as integral to their strategies, reflecting a broader shift towards sustainable practices, an encouraging sign for the future of our economy,” says Jane Galvin, head of corporate clients for Santander UK.

Santander’s report is carried out twice a year and most recently surveyed 1,025 UK businesses with a minimum annual turnover of £1mn. Of these, 60% were international, 28% were UK-only and 13% plan to expand internationally in the next 12 months.

Reshoring is also a “notable trend”, Santander says, as firms look to “enhance resilience and mitigate geopolitical risk”. More than a third of UK companies have already moved their supply chains nearer to the UK, with a further 14% planning to do so in the next two years.

“Overarching geopolitical tensions continue to shape the global reality of international trade,” the report says.

This is seen with firms that rely on inputs from China, which make up 41% of the firms surveyed by Santander.

Of these, 23% are “actively” reshoring away from the Asian powerhouse compared to 14% in Q3 2023. Two thirds are “taking steps to mitigate their supply chain exposure to China” and 43% have plans to diversify away.

The attacks on vessels in the Red Sea also pose a threat to 12% of firms, and this rises to almost a third for businesses in the wholesale and retail trade sector.

Aside from geopolitical risks, almost half of firms surveyed said rising costs and inflation are a major business risk, followed by energy prices, finding skilled workers and interest rates.

But respondents also said they expect “increasingly benign market conditions” – including a drop in inflation – in the next one to two years.

Businesses are however concerned about “sluggish” economic growth. “The sense among businesses is that while the economic slowdown has been shallow, there will also be a shallow recovery, rather than a weighty bounce back,” the report says.

Despite these pressures, business confidence is rising among respondents, with more than a quarter thinking about expanding in the next three years.

Almost a third said they are “very confident” their business will grow over the next three years, up from 22% in Q3 2023, Santander says.

The lender says 47% of companies report that international trade is increasingly important for them – more than double the number in the third quarter of 2021.

For those surveyed, the US, Canada and Australia are the top three markets for UK businesses trading internationally.

Santander adds that the proportion of UK companies expecting more than half their revenue to come from international markets in the next 12 months has doubled in the last two years, rising to 28%.

The survey also revealed an increase in firms looking for government help with reducing regulatory requirements for international trade, rising to 35% from 26% in Q3 2022.

“Bureaucratic challenges are amongst the biggest barriers to international trade for businesses large and small, and there is a clear demand from companies for help to overcome this,” says Galvin.