High inflation remains the biggest challenge for SMEs in the coming months, with more than a third of businesses citing it as their biggest problem in the year ahead.
WorkLife’s latest research, via its Small Business Monitor, found business were also concerned about supply chain complexities and rising business rates (both of which were cited by 22 per cent of respondents).
People management issues were also high on the agenda, with looking after employee wellbeing (22 per cent) and sourcing and recruiting quality talent (20 per cent) also being named as potential problems for the year ahead
Much further down the list were slowing consumer demand (14 per cent), geopolitical risks (13 per cent), and other financial issues such as getting access to loans or over drafts (12 per cent) and paying back Covid-19 support loans (11 per cent).
When it comes to dealing with inflation, many than a third of SMEs (34 per cent) say they will be forced to increase the cost of products or services, while a similar number (31 per cent) were exploring cheaper means of sourcing the goods and services needed to run their business.
The research found that these inflationary pressure though could derail many small businesses investment plans. Almost a fifth (18 per cent) of respondents said were putting plans to invest in the business on hold due to high inflation, while 13 per cent were scrapping investment plans altogether.
For some employees, redundancies or cuts to working hours could be on the horizon. While one in 10 (10 per cent) of firms expected to lay off staff as a result of rising inflation, the same number said they were looking at reducing hours. Some 7 per cent said they were looking at reducing salaries and benefits. However around 11 per cent of firms are expected to expand pay and rewards, possibly to deal with recruitment and retention issues.
However, despite these problems, WorkLife says there has been a significant uplift in optimism regarding future business income and revenue, when compared to similar studies over the last few years.
Almost 4 in 10 (39 per cent) SMEs expect revenue to increase in the next 12 months, compared with just 26 per cent in similar research undertaken in summer 2021. A smaller number (31 per cent) of firms expect it to reduce, while 25 per cent predict income will remain at the same level.
WorkLife by OpenMoney managing director Niamh McLaughlin says: “While there is clear positivity from SMEs in terms of business income, the outlook remains very unclear two years on from the first UK lockdown. Not only are smaller businesses feeling the effects of rising prices and bills, they are also grappling with issues such as supply chain constraints and labour shortages.
“Particularly for firms being forced to put investment plans on hold, it’s of upmost importance to ensure any available budget is being allocated to the areas that will have the biggest impact on the overall health of the business.
“How employers help staff manage the impact of inflation on their own finances could well impact their decision to stay and strive to support the company long-term, so a robust pay and benefits strategy is certainly not an area to be overlooked right now.”
The post Inflation hitting SMEs’ benefit spend and investment plans appeared first on Corporate Adviser.
