China remains the number one supply destination for UK retailers with more than a third (35 percent) choosing it as their preferred destination from which to source stock even though inflation is running at a 37-month high of 6.5 percent. The USA and Germany were the second and third most popular supply destinations.

However, when asked where they were looking to source goods from in future 13 percent of retailers tipped Vietnam as their destination of choice for clothing, footwear and accessories as well as industrial wholesale items. A further 13 percent of retailers, which do not already import stock from China, said they plan to do so in future. Vietnam and China aside retailers could not agree on where they will be looking to next as a potential supply destination. Among those countries mentioned were Spain, Belgium, Israel, Hong Kong, Romania and Brazil.

Despite the number of countries currently being explored by retailers, suppliers will need to work hard to persuade retailers to actually switch destination. Around half of retailers (51 percent) will only look for new destinations when forced to do so and a further 24 percent say they never look for new countries from which to import stock. Only a quarter of retailers (24 percent) are constantly looking for new supply destinations.

Richard Lowe, Head of Retail and Wholesale at Barclays Corporate, said: "Retailers continue to at least explore new overseas destinations as inflationary pressures, both at home and abroad, force the sector to search for suppliers in alternative low-cost locations. The challenge for rival destinations such as Vietnam is that China still offers great value and other countries will be hard pushed to take pole position. However, the Chinese government needs to balance the country's growth aspirations while keeping inflation in check and, although inflation has probably peaked, there are still significant underlying pressures which mean inflation is likely to fall back but, slowly".

With inflation continuing to squeeze margins cost remains the number one consideration when choosing a supply destination. 91 percent of retailers asked placed cost above all else, ahead of quality which was placed second by 72 percent of retailers. Interestingly, speed of service and reliability were not amongst retailers' top five considerations in choosing a supply destination. Only 10 percent cited reliability as an important factor, while only 2 percent of retailers said language was their key consideration so there would appear to be few limitations for global suppliers keen to get a foothold in the retail space.

Richard Lowe continued: "There is everything to play for if you are one of the countries not currently on the radar of the UK's biggest retailers. Get the cost and quality right and the rest should follow. For retailers, there are clearly opportunities out there to improve margins as consumers continue to rein in their spending".