A perfect storm for business
Running a business has not been easy over the last few years. All the uncertainty and upheaval around Brexit was very unhelpful. Then we’ve had Covid (especially tough on everyone in hospitality!). With Brexit “done” (well, sort of…) and vaccines making the pandemic more manageable, things were looking up. But then a fresh lot of challenges have come along – and they’re affecting virtually every sector. We’re not saying this to depress you. Quite the opposite – if you are finding things tough right now be reassured that it’s not just you…we’re all suffering! Having said that, the challenges of the last few years have made companies a lot more resilient. And things are sure to improve over time (business has always been cyclical). So, it’s a case of “Keep calm and carry on”. In this post we give a quick overview of the main pressures impacting the UK economy and all those of us in it. And a little idea to help you and your team get through it.
Not so great expectations
5,700 companies were surveyed for the latest Quarterly Economic Survey from the British Chambers of Commerce. The findings show that business confidence, though quite buoyant, is weakening. 54% of firms expect an increase in turnover over the next 12 months - down from 63% in Q1 2022 and the lowest figure since Q4 2020. 43% of firms are predicting an increase in profitability, down from 50% in Q1 2022. BCC director general Shevaun Haviland commented that "The red lights on our economic dashboard are starting to flash. Nearly every single indicator has seen a deterioration since our last survey in March.”
Photo by Krzysztof Hepner on Unsplash
Inflation taking the wind out of everyone’s sails
82% of companies surveyed by the BCC cite inflation as a growing concern for their business, a historical high level. Just about everything it takes to run a business is getting more expensive. Energy prices are going through the roof, which is a big worry as we head into winter – bills for running machinery and heating premises are rising frighteningly fast. Transport costs are being driven up by the high price of oil. This makes running your own vehicles more costly but it also drives up the price of materials. Even the cost of borrowing is increasing as the Bank of England increases interest rates to combat this inflation. All of these factors put pressure on profit margins and 65% of firms covered by the BCC survey expect to raise prices in the near future (a record high and a 23-percentage-point rise on a year ago).
Photo by Towfiqu barbhuiya on Unsplash
Worries about weakening consumer demand
Inflation, and the cost of living crisis it is creating, is also a major headache for consumers – as prices for essentials such as heating, fuel and food spiral upwards at an alarming rate people are watching every penny. Firms are therefore very concerned about the effect on their sales. In the BCC survey companies expecting an increase in turnover over the next twelve months dropped from 63% to 54% - the lowest figure since Q4 2020 when much of the UK was under some form of lockdown. 28% are now predicting a decrease in profits.
Photo by Laura Davidson on Unsplash
Disappearing workers and higher wages
A third challenge for businesses is the shortage of workers. Britain’s overseas workforce has shrunk by about 20% since Brexit. What’s more, many workers have simply not returned after the various lockdowns - the number of people of working-age who are neither in work nor seeking employment is 400,000 higher than before the pandemic.
Many businesses, especially in manufacturing, airlines, retail and hospitality are struggling to recruit in the numbers they need. Staff retention is also a major headache at present. The cost of living crisis is putting pressure on wages. Employees are demanding more pay and better benefits – companies are having to comply or face severe staff shortages.
Light at the end of the tunnel
All of this makes pretty dismal reading. However, it’s likely that the government will be forced into measures that relieve the pressure on individuals and which encourage business growth – so things could get better quite soon.
We’ve also got an idea for you that may help. Whatever else is happening it’s important to stay positive – a case of “if you can keep your head when all about you are losing theirs”. What’s more, when life is hard for everyone on your team (at work and at home) it’s also vital that you show how much you appreciate them. Thirdly, morale will be better if you give people something to look forward to. With all this in mind it’s a particularly good time to organise an end of year party – it could be the best investment you can make right now! Clevedon Hall is the idea venue and the team here are experts at creating memorable events that make the most of even the most modest budget.