Inflationary pressures pose a huge risk to the SME sector with 90% of owner managed businesses in our region reporting these will impede their growth in 2022. This is one of the key findings of a survey of 335 of these businesses carried out by the Association of Practicing Accountants (APA), with 175 based in the North of England.
Other key regional findings include:
The biggest challenges as economy gets back on its feet will be inflationary pressures (36%) followed by labour shortages (18%) and uncertain trading conditions (17%)
60% report that staff recruitment and retention is now presenting more of a challenge than 12 months ago
69% of SMEs report that rising energy costs are impeding their ability to deliver
38% report that Brexit had either had a negative or very negative impact on their business against 7% who reported a positive or very positive impact
Despite these challenging economic headwinds there is also evidence that those businesses that have survived the pandemic are now more resilient and more confident.
33% of Northern businesses are likely to make growth their main priority over the next 3-6 months with 62% focused on surviving or sustaining their business.
63% of Northern owner managed business report that they are in better shape for the challenges of the future than before the pandemic (but compared to 81% nationally)
87% of respondents were either very or somewhat confident that they would be able to access the finance they needed over the next 6 months
80% think that overall, the UK Government response to Covid has been either very or quite effective
52% report that it is either likely or very likely they will make significant capital investment in their businesses in 2022/23.
Commenting on the findings Paul Dickson, CEO of APA member firm Armstrong Watson, said:
“Having navigated Brexit and the pandemic, owner managed businesses within our region are now confronted with the triple challenge of rising inflation, increasing wage costs through national minimum wage and the National Insurance hike, as well as increased energy costs. Many businesses have done well to survive the last 2 years and having looked forward to a period of economic stability post-Covid, they are faced with the opposite. For businesses not only in the North, but across the UK, it is imperative that the Government take a more realistic view of our future trading relations with Europe and recognise that labour shortages, alongside a more challenging export environment, pose a real threat to recovery and the danger of drifting into a period of sustained rampant inflation."
“Whilst it is encouraging to see that many Northern business owners are keen to invest in the future of their businesses, uncertainty still remains across many sectors of the economy.”
