Supply chains top concern for businesses over next 6 months

In its bi-monthly survey on challenges and opportunities facing UK businesses, global and domestic supply chain pressures outrank access to labour, rising interest rates and mounting costs as the top concern facing over half (54 per cent) of mid-sized businesses over the next six months.

The data also revealed that a third (34 per cent) of mid-sized businesses are experiencing delays due to complex customs regulations as a direct result of Brexit. The same number (34 per cent) have seen the cost of goods sourced from the EU increase, while nearly a quarter (24 per cent) have stopped sales to the EU completely. A rising number of COVID-19 cases and recent lockdowns in China have also caused delays for almost two in five businesses (37 per cent). 

While supply chain disruption is the biggest challenge facing firms, increasing costs are also a cause for concern. One in three (34 per cent) report that raw materials and goods have become more expensive. The cost of importing or transporting materials and goods has also climbed for 31 per cent of mid-sized businesses, rising to 40 per cent in the property and construction industries. Most alarmingly, a quarter (25 per cent) of firms are unable to source the goods and materials they need. 

Faced with acute supply chain pressures and rising costs, businesses are taking action. Almost a quarter (23 per cent) are onshoring their supply chain as they seek to reduce their dependence on importing goods or working with overseas suppliers. Even more (28 per cent) are passing on rising costs to customers by increasing prices, with the same number planning to downsize their businesses to cut costs. With access to labour ranked the second-greatest challenge facing mid-sized businesses, skills and remuneration have become a top priority. One in three (32 per cent) are investing in upskilling or retraining staff to tackle the skills gap and workforce shortages. Twenty-nine per cent are introducing more flexible working, and 33 per cent will increase pay this year, with 8 per cent doing so in line with or above inflation. Meanwhile, 12 per cent are providing separate or one-off payments aimed at supporting employees through the cost-of-living crisis. 

In the face of these challenges, businesses remain determined to drive growth. Thirty-six per cent are seeking new direct investment or equity financing for this reason, while nearly 39 per cent expect to launch new products or services this year.  

Ed Dwan, partner at BDO, said that without the right support to help manage lingering labour and productivity challenges, mid-sized firms could see a knock-on impact on plans for improving productivity in the months ahead.