{"id":17811,"date":"2021-12-09T14:48:34","date_gmt":"2021-12-09T14:48:34","guid":{"rendered":"https:\/\/www.openbusinesscouncil.org\/?p=17811"},"modified":"2022-05-04T21:37:21","modified_gmt":"2022-05-04T21:37:21","slug":"5-key-challenges-facing-smes-in-2022","status":"publish","type":"post","link":"https:\/\/www.footballthink.com\/5-key-challenges-facing-smes-in-2022\/","title":{"rendered":"5 Key Challenges Facing SMEs In 2022"},"content":{"rendered":"
By Douglas Grant, Group CEO at Manx Financial Group PLC<\/span><\/strong><\/p>\n 2021 has been a real test of resilience for SMEs. Added to the existing challenge of COVID have been new disruptive factors, including a supply chain crisis, which led to an increase in demand for working capital, as well as rising inflation and labour costs, all reducing their ability to generate economic growth.<\/strong><\/p>\n <\/p>\n Whilst government-backed schemes such as the Bounce Back Loans Scheme (BBLS) and Recovery Loan Scheme (RLS) have provided a lifeline for small and medium-sized businesses (SMEs) facing significant liquidity pressures, SMEs need a plan in place to avoid these challenges becoming a structural issue which will stifle their future growth and imperil their survival.<\/p>\n Whilst the UK economy is currently on track to be the fastest-growing economy in the G7, there are five key areas of risk which need to be managed by SMEs to ensure they can capitalise on and contribute to economic growth in 2022.<\/p>\n The UK Government has announced that CPI inflation could hit 5% in 2022, driven principally by increasing energy costs, as the economy demonstrates fundamental symptoms of heating up. Supply chain issues have been more prevalent than ever as shortages of labour, skills, energy and raw materials add to the escalating list of headwinds that SMEs face heading into 2022. SMEs will also need to be able to distinguish between temporary and permanent inflation \u2013 with some areas impacted by inflation such a labour costs being potentially irreversible.<\/p>\n The rising costs of goods and utilities, coupled with a tightening of the labour market and subsequent wage inflation, will result in unprecedented demand for working capital and SMEs will need to ensure they have sufficient liquidity provisions to operate in this inflationary environment. Increased inflation will also force businesses to scrutinise their internal pricing models and decide whether they can sustain margins with higher input prices or choose to pass down the cost to consumers.<\/p>\n Following the sequence of lockdowns in the UK, small business owners are finally experiencing a resurgence in demand for goods and services, with many seeking credit to meet this growth in demand. The governor of the Bank of England, Andrew Bailey, has however, indicated that the recent jump in inflation will necessitate an interest rate rise which will disproportionately affect small businesses reliant on funding in their early stages of growth.<\/p>\n With a rate hike on the horizon and the cost of borrowing set to increase, SMEs would be well-advised to take stock of their current capital structure and if appropriate, access fixed term, fixed rate loans to prevent exposure to an increasingly volatile lending market.<\/p>\n Adding to the number of plates that SMEs must spin in 2022, is the increasingly challenging task of retaining and recruiting skilled staff. The pandemic has radically changed the working environment, fostering new challenges and responsibilities for business owners to contend with. The workforce is becoming increasingly transient, demonstrated most prevalently in the last year and a half, with SMEs having to adapt and recruit from a wider talent pool as the era of cheap labour comes to an end.<\/p>\n A tightening of the labour market putting upward pressures on wages, compounded by a lack of skilled labour due to the ramifications of Brexit, is having a further negative impact on firms\u2019 working capital. Moving into the new year, SMEs will have to diligently balance the need to attract skilled staff through financial incentives whilst ensuring they have sufficient working capital to continue operations.<\/p>\n1. Inflation<\/h2>\n
2. Interest Rates<\/h2>\n
3. Recruitment<\/h2>\n