Inflationary pressures pose a huge risk to the SME sector with 87% of owner-managed businesses reporting these will impede their growth in 2022. That is one of the key findings of a survey of 335 businesses from accountants, business and financial advisers Kreston Reeves and the Association of Practicing Accountants (APA).
The survey reports:
- 64% of SMEs report that rising energy costs are impeding their ability to deliver their business growth.
- 43% report that Brexit had either had a negative or very negative impact on their business against 4% who reported a positive impact.
- 59% report that staff recruitment and retention is now presenting more of a challenge than 12 months ago, with only 3% reporting this is now less of a challenge.
- 62% are focused on surviving or sustaining their business, against 33% who are looking to grow over the next six months.
Despite these challenging economic headwinds, there is also evidence that those businesses that have survived the pandemic are now more resilient and more confident:
- 81% of owner-managed business report that they are in better shape for the future than before the pandemic.
- 82% of respondents were either very or somewhat confident that they would be able to access the finance they needed over the next six months.
- 79% think that overall the UK Government response to Covid has been either very or quite effective.
- 48% report that it is either likely or very likely they will make significant capital investment in their businesses in 2022/23.
Andrew Griggs, Senior Partner at Kreston Reeves said: “The uncertainty following the Covid pandemic, the UK’s new relationship with its largest trading partner and now conflict in Ukraine, together with pent-up consumer demand, rising inflation and energy prices, will continue to create challenging economic and trading conditions for many months if not years to come.
“Now is the time for businesses to rethink and look towards building a business for the next decade. That will mean addressing immediate challenges and, in the longer term, recalibrating business models. A ‘whole business’ view and an investment mindset is needed to build tomorrow’s business.”
Martin Muirhead, APA Chairman, said: “Having navigated Brexit and the pandemic, owner-managed businesses are now confronted with the double challenge of rising inflation and increased energy costs. Many of these businesses have done well to survive the last two years. Having looked forward to a period of economic stability post-Covid they are confronted with the opposite. It is imperative that the UK Government take a more realistic view of our future trading relations with Europe recognising that labour shortages coupled with an altogether more challenging export environment pose a real threat to recovery.
“Policymakers also need to recognise that uncertainty remains across many sectors of the economy and that businesses want reassurance as well as clear and unambiguous advice and support. Adopting a flexible approach to business policy which recognises the many challenges facing owner-managers will be key to a sustainable recovery.”
If you would like to receive a copy of the detailed research report, please email firstname.lastname@example.org.