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.”
