SMEs are feeling the pinch thanks to red-hot price growth

High inflation is by far the biggest challenge for SMEs over the next 12 months.

These are the results that WorkLife’s latest Small Business Monitor has revealed.

More than a third of the smaller companies, WorkLife, engaged in the said inflation as one of the three biggest challenges their company faces over the next 12 months. Following this were a number of other operational concerns, including complexity in the supply chain and rising business rates. Personnel management issues were also high on the agenda, and taking care of employee well-being and sourcing and recruiting quality talent were also mentioned as relevant challenges.

Much further down the list was lowering consumer demand, geopolitical risks and other economic problems, such as accessing loans or excess lending and repaying Covid-19 subsidized loans.

With so many SMEs feeling the pressure of sky-high inflation, it is possible that prices could rise even more for consumers. More than a third of SMEs say they will seek to increase the cost of products and / or services in the face of rising inflation, while a similar number explored cheaper methods of purchasing goods and services needed to run the business. .

The study showed that SMEs’ investment plans could also be hit hard. Nearly one-fifth of respondents said they put plans to invest in the company on hold due to high inflation, while 13% scrapped investment plans altogether.

For some employees, layoffs or cuts in working hours may be on the horizon. While 1 in 10 (10%) of companies expected to lay off staff due to rising inflation, the same number said they were looking at reducing working hours. About 7% looked at reducing wages and benefits, but it’s not all doom where 11% of companies expect to expand wages and rewards.

Despite the threat of inflation, there is a significant increase in optimism about income compared to previous research waves. Nearly 4 out of 10 SMEs expect revenue to increase over the next 12 months, compared to just 26% in the summer of 2021. A small number of companies expect it to decline, while 25% anticipate that income will remain at same level.

Niamh McLaughlin, CEO of WorkLife of OpenMoney, commented: “While there is clear positivity from SMEs in terms of business income, the outlook is still very bleak two years after the first UK lockdown. Not only are smaller companies feeling the effects of rising prices and bills, they also struggle with issues such as supply chain constraints and labor shortages.

“Especially for companies that are forced to put investment plans on hold, it is extremely important to ensure that any available budget is allocated to the areas that will have the greatest impact on the company’s overall health. How employers help staff manage inflation impact on their own finances may well influence their decision to stay and strive to support the company in the long run, so a robust pay and benefit strategy is certainly not an area to be overlooked right now. “

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