Business growth derailed by cost of living crisis
Businesses are ill equipped to cope with spiralling costs and soaring energy bills, fresh analysis has revealed.
Rising costs are the biggest challenges facing almost half of businesses in the next six months, a survey by accounting giant BDO has revealed.
Almost a third of UK businesses are seeking additional finance as a direct result of inflationary pressures with 24 per cent taking on higher debt to ensure survival.
“This is a deeply concerning time for the UK businesses, with inflation and global uncertainty all threatening to stifle the post-pandemic recovery,” said Ed Dwan, a partner at BDO.
“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,” Dwan continued.
According to BDO a majority of businesses planned for inflation to stay between three and five per cent this year – a gross underestimate according to official modelling which predicts inflation will reach nine per cent in 2022.
A third of businesses are now planning to pass cost increases onto customers by upping the price of goods and services. While 30 per cent of businesses plan to reduce their offering to customers as a result of these products becoming less profitable a similar number plan to switch to cheaper suppliers to cut costs.
“These businesses are the engine of the economy and their concerns should not be overlooked,” Dwan said, urging the government to introduce targeted policies that encourage investment and drive growth for the UK’s medium sized businesses.
Growth is also threatened by a skills shortage, with more than a quarter of businesses saying that finding staff with the right skills is the biggest challenge facing their company.
Read more: As inflation pushes up prices, businesses should only hike them where it really counts