Supply chain chaos and inflation outstrip energy bills as top concern for businesses

Supply chain disruption and rising costs are the biggest worries facing the UK’s mid-sized businesses in the coming months, according to the latest research from accountancy and business advisory firm BDO.

In the bi-monthly survey of 500 medium-sized businesses’ leaders, half (49%) said rising supply chain costs ranked top of their list of concerns between now and Christmas. Supply chain disruption is also one of the biggest challenges facing one in three businesses (33%), while just 16% were most concerned about energy bills specifically.

Over a quarter of firms (27%) fear customers spending less in the run-up to Christmas due to the cost of living crisis. This rises to almost a third (30%) in the leisure and hospitality sector, as firms worry about the impact on trading at a time of year which is traditionally one of their busiest.

Confronted by a triple-threat of rising costs, supply chain disruption and concern over reduced consumer spending, businesses are taking action. While nearly one-fifth (17%) are absorbing rising costs to keep end prices the same, a greater portion (20%) are raising the price of goods and services. Nearly one in five (17%) will have to make redundancies.

Nearly one-fifth (18%) are taking on new debt or extending current overdraft facilities, despite soaring interest rates and borrowing costs a top concern for 30% of firms.

Firms remain optimistic despite mounting headwinds

Even in the midst of these challenges, businesses still expect to enter 2023 in a better position that at this time last year. Nearly three-quarters (72%) say they are ahead of their forecasted performance for 2022, despite multiple economic headwinds driving downward pressure on performance.

Meanwhile, nearly two-thirds (60%) are seeking new funding earlier than planned as they turn their focus to innovation and growth, with one in five (20%) seeking funding ahead of schedule to support new product or service development.

Firms call on government to help manage supply chain concerns

Businesses are calling on the government to help ensure their success next year. Support schemes designed to manage supply chain issues are the policy intervention that nearly a quarter (23%) most want to see. Further targeted support for energy bills (19%) is also front of mind for business leaders.

Ed Dwan, partner at BDO LLP, said: “2022 was meant to be the year of recovery for both businesses and the wider economy. Instead, they continue to weather tough challenges, such as an energy crisis, political uncertainty and record levels of inflation.

“While rising energy bills have dominated the political and news agendas, it’s clear that supply chain issues and rising costs in the round are causing serious headaches for the UK’s mid-sized businesses. These firms are the engine of our economy and they need the government to provide a helping hand to ensure they are in the best position to be able to grow in 2023 against the challenging backdrop.”