Rising costs are the biggest challenge facing almost half of UK businesses in the next six months, a survey by BDO has found.
The research found that almost a third are seeking additional finance as a direct result of pressure brought about by inflation, with 24% taking on higher debt to ensure survival.
The report says a majority of businesses planned for inflation to stay between 3% and 5% this year, with this far short of official modelling which predicts inflation will reach 9% in 2022. The poll shows that a third of businesses plan to pass higher costs onto customers by increasing the price of goods and services.
While 30% plan to reduce their offering as certain products have become less profitable, a similar number plan to switch to cheaper suppliers to cut costs. The survey also points to the impact of skills shortages, with more than a quarter of firms saying that finding staff with the right skills is the biggest challenge they face. Reflecting on the findings.
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.
Rsing 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.
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.
Ed Dwan, Partner at BDO said “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.”