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End-of-year disruption threatens to derail long-term business recovery

The majority of businesses are expecting a less-than-favourable Christmas, according to the latest BDO research report, but more than half also expect that things will improve.

End-of-year disruption threatens to derail long-term business recovery
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According to the report, 80 per cent of mid-sized businesses expect rising fuel prices, supply chain disruption or increasing energy costs to impact end-of-year trading.

Rising inflation is set to take a toll with almost a third of businesses planning to increase the prices of their goods and services as a direct result.

Despite ongoing issues, 62 per cent of businesses expect to return to pre-pandemic revenues in the next 12 months.

Businesses in the UK are reporting that supply-chain disruption, rising costs and ongoing COVID-19 restrictions could lead to a reduction of goods and services and higher prices over the Christmas trading period, according to new research from accountancy firm BDO.

The bimonthly survey of 500 leaders of medium-sized businesses reveals that a third of businesses expect their final trading month of this year to be disrupted by rising fuel costs, with the same number concerned about increasing energy prices and a third also concerned about supply chain disruption.

More than a third (34 per cent) also cited ongoing COVID-19 restrictions as an issue likely to impact the availability of products and services.

Reacting to these challenges, nearly half (45 per cent) of businesses are prioritising managing their domestic or international supply chains in the next three months, above other business operations.

As businesses look to the longer-term, higher levels of inflation are set to impede growth. More than a quarter (26 per cent) of firms see rising inflation and potentially higher interest rates as the issues that will have the biggest impact on their business in the next year.

Almost a third (32 per cent) of businesses plan to cut the number of products or services they offer as a direct result of inflation, and 31 per cent are planning to increase their prices. This is a particular issue for manufacturing businesses, with almost two-fifths (39 per cent) planning to decrease the number of products on offer and a similar number set to increase prices.

Meanwhile, despite warnings around higher living costs in the next few months, almost a fifth (17 per cent) of business leaders said they would not be able to increase pay, which could bring challenges in attracting new joiners at a time when competition for staff is fierce.

“Following a year of disruption, many businesses will have been hoping for a strong finish to 2021 and a fresh start for 2022. The harsh reality is that continued supply chain issues, rising energy prices and increasing costs means that many are taking further drastic measures to stay afloat. These issues could also be further exacerbated by the new COVID-19 variant,” Ed Dwan, partner at BDO said.

“The speculation around interest rate rises is only set to increase, and it’s fair to say all eyes will be on the Monetary Policy Committee when they make a decision later this month.”

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