Inflation, skills shortages and cost of living crisis threatening business growth
Inflation, skills shortages and cost of living crisis threatening business growth
- Growing debt piles and rising costs loom large for UK’s mid-sized businesses
- A third of businesses increasing prices in response as the same number plan to reduce their range of goods and services
Increasing energy bills or the overall rising costs of living are the biggest challenges facing almost half (47%) of businesses in the next six months, according to new research by accountancy and business advisory firm, BDO.
The bi-monthly survey of 500 leaders of medium-sized businesses reveals a third will increase the price of their goods and services in response to rising costs. Retail and wholesale businesses have been particularly hard hit, with 39% planning an increase in prices.
Meanwhile, rising costs mean almost a third (30%) of businesses are planning to reduce the number of goods and services they offer, as a result of these products becoming less profitable. 29% are switching to cheaper suppliers to reduce costs.
Warnings from the Office for Budget Responsibility that inflation could reach close to 9% in 2022 are also giving serious cause for concern, with almost two thirds of mid-sized business (59%) having only planned for an inflation rate of 3-5% this year.
As a direct result of rising inflation almost a third (31%) are seeking additional finance, rising to two-fifths (42%) of hospitality and leisure businesses and 36% for retail and wholesale – all industries that have already been hard hit by COVID-19. Even as analysts predict further hikes in interest rates, 29% of businesses are using new or existing overdraft facilities, with a quarter (24%) taking on higher levels of debt to ensure their survival.
Recruitment is another area that threatens to derail growth. More than a quarter of businesses (26%) said finding staff with the right skills is their biggest challenge over the next six months.
24% of businesses are most worried about the cost of hiring and with competition for talent fierce, a fifth (19%) see retaining employees as their biggest challenge this year. Almost a third (30%) are increasing wages in an effort to support staff through the cost-of-living crisis.
Ed Dwan, partner at BDO commented:
“This is a deeply concerning time for the UK businesses, with inflation and global uncertainty all threatening to stifle the post-pandemic recovery.
“The large number of businesses taking on new or increased debt piles in a period of mounting inflation is testament to the challenges they face, and the hike in National Insurance this month could prove a tipping point for many in the midst of the cost-of-living crisis.
“These businesses are the engine of the economy and their concerns should not be overlooked. As part of its levelling-up agenda, the Government should consider introducing more targeted policies that encourage investment and drive growth for the UK’s medium-sized businesses.”
ENDS
Note to editors
Methodology
Bimonthly survey of 500 medium-sized businesses. Medium sized businesses are defined as businesses with revenue between £10-£300m. The survey was conducted by Censuswide on behalf of BDO in March 2022.
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