With business reports highlighting that inflationary pressures and supply chain issues are expected to have a marked impact on SMEs, Accountant Wbg is advising business owners to react quickly to these economic challenges.
With annual UK inflation on the consumer prices index measure projected to top 10% this year, Mark Mulholland, partner in the firm’s Business Advisory department, warned that, while 80% of the cause of inflation can be attributed to energy and tradeable goods, it nevertheless affects all sectors and is likely to be a major factor impacting on SME financial performance for some time.
“Prices are rising very quickly, and I would advise business owners to keep a close on their costs and be prepared to react speedily – they need to be flexible and fast on their feet,” he said.
“And business owners looking to sign new deals should prioritise flexibility, so should avoid fixed price contracts where possible.”
Mr Mulholland cautions that there are signs of potentially significant supply chain issues emerging later this year.
“With parts of China re-entering lockdown, business owners should be aware that there could be supply chain issues emerging and so should respond accordingly,” said.
Noting that business investment remains weak, and a ‘make-do-and-mend’ culture is afoot across the economy at present, he cautions that earnings are unlikely to keep pace with inflation.
“While inflation is expected to grow by 10% this year, earnings would be lucky to achieve 5% growth,” he said.
“So, my advice to business owners is to act quickly, keep your eye on your costs and your margins and avoid fixed price contracts where possible.”
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