Supply chain pressures are top challenge for mid-sized businesses

24th October 2023

Supply chain pressures are the top challenge facing mid-sized businesses in the lead up to winter, according to the latest research from accountancy and business advisory firm, BDO.

In the regular survey of 500 mid-sized business leaders, almost a third (29%) were concerned that supply chain challenges, such as suppliers folding or stock shortages, could stop them meeting revenue targets this year. Over half (57%) were concerned about rising costs making materials or access to labour unaffordable in the UK or overseas, as continued international conflict reshuffles global supply chains. One in three (35%) were worried about the disruption making it difficult to fulfil contracts, rising to 38% amongst retail and wholesalers.

Businesses are also feeling the dampening effects of an inflationary environment on demand for products or services. Nearly one in four mid-sized firms (24%) consider customers spending less due to inflation or the cost of living crisis to be one of their most significant concerns in the run up to the Christmas trading period. Higher interest rates and borrowing costs follow closely behind as a top challenge facing almost a quarter (23%) of businesses in the next three months.

In addition to these mounting challenges, businesses are once again battling with energy costs as international conflicts prompt European gas prices to soar. Almost three-quarters (73%) are more worried about a rise in energy bills this winter compared to last year. This rises to eight in 10 (79%) for manufacturers, typically classed as energy-intensive businesses, and to 76% across the hospitality and leisure sector.

As a result, almost half (48%) plan to invest in energy efficiency measures, such as building insulation or new equipment, while two-fifths (40%) report that they have or may need to pass on an increase in energy costs to their customers.

However, many businesses fear this may not be enough and are calling for new government support as pressure grows to lessen costs in other areas. One in five (20%) want to see cuts to business rates or capital allowances, while almost half (44%) call for the Government to help fill workforce gaps with new measures, such as greater support in hiring apprentices.

According to research by BDO, mid-sized businesses with revenues between £10m and £300m that are privately owned, AIM listed or backed by private equity, employ eight million people and provide around a quarter of UK jobs.

Richard Austin, Partner at BDO LLP, said “These are significant challenges in the run-up to winter – traditionally the busiest period of the year and a “golden quarter” for some of the sectors at the heart of the UK economy.”

“As the engine of the UK economy, mid-sized businesses need the right tools to help them, not only weather the months ahead, but also to deliver their plans for growth.”

“These businesses want to see targeted actions and policies in addition to fiscal measures. As we all navigate through an increasingly challenging economic period, the role these businesses will play in the overall recovery of the UK economy should not be undervalued.”