Dr. Ella Kavanagh:

There has been the issue of companies, as the Deputy said, reshoring and bringing production of their component parts onto newer sites and away from being dispersed or spread out. They bring them together in a particular centre. That is important. There is a question about security around component parts now because for the first time we have seen the impact of a disruption to the supply chain. It has introduced an uncertainty, as Professor Whelan mentioned, into the supply chain, which we have not been familiar with. Whether companies react to that by building more security and ensuring they have the component parts closer to them and more readily available is a major consideration. That might affect their investment decisions as to where they locate, etc. That would be important.

If costs increase for businesses, one would expect that competition means they would look at the supply chain again and try to minimise costs. They have been doing that over recent decades and it partially explains the really low inflation we have been seeing. It is about how businesses react. If their natural inclination is to try to increase efficiencies as much as possible, we might expect them to return to old patterns of behaviour. For example, we have seen that, since the financial crisis, banks now hold a larger buffer of capital. We might see the same thing with companies wanting to hold a larger buffer of raw materials, semi-finished goods and so on. Over time, we might wonder whether that situation might change and they revert to being more concerned about efficiencies and competition.