With inflation and interest rates continuing to escalate, the unprecedented costs of keeping the doors open is revealed to be the challenge that is of most concern to UK SMEs. This is according to new research from solution-led fintech provider, Nucleus Commercial Finance.
The findings revealed the top three biggest SME concerns in the year ahead. They are: high levels of inflation pushing up internal costs (staffing costs, rent, utilities etc.) (40 per cent); unprecedented utility costs (37 per cent); and high levels of inflation pushing up external costs (supply chain etc.) (35 per cent).
The findings also highlighted that people focused issues remain a notable concern as businesses look to chart a path through 2023 and beyond. Around one in seven (15 per cent) SMEs identified the mental health of their workforce as one of their top three threats. More than one in 10 (12 per cent) cited the shallow talent pool to hire from, and one in ten cited the mental health of the senior team (10 per cent).
In addition, nine per cent stated that the physical health of the workforce, ‘quiet quitting’ of employees (eight per cent), and the physical health of the senior team (seven per cent) were of equal concern this year.
Who’s really addressing threats?
Looking at the steps being taken to address the known and looming business threats, more than one in five (21 per cent) admit that they have taken none. Of those that say they have, it is increasing the price of products/ services (26 per cent) that is the steps cited by the plurality. Seventeen per cent say they are relying on switching utility/service provider to help mitigate the impact. Meanwhile, 13 per cent of SMEs say that they are focusing on upskilling their employees.
Top steps being taken to mitigate the impact of biggest business
- Increasing the price of our products/services – 26 per cent
- Switching utility/ service providers – 17 per cent
- Up-skilling our employees – 13 per cent
- Encouraging more flexible working (flexi- shift patterns, remote working etc) – 12 per cent
- Freezing staff wages – 12 per cent
- Delaying planned investment in tech/ infrastructure – 12 per cent
- Shelving growth ambitions – 12 per cent
But, despite being clear on the threats ahead, there is very clearly a mitigation gap. Twenty-five per cent of SMEs say ’the mental health of the workforce’ is one of the top three biggest threats for the year ahead. However, only 11 per cent identified it as the top threat and just seven per cent of SMEs are giving employees the option to take ‘mental health days‘. Just four per cent are increasing staff perks.
Chirag Shah, CEO and founder of Nucleus Commercial Finance commented: “UK SMEs are looking aghast at the storm clouds overhead – fully aware of the challenges posed by the year ahead. While rising costs are typically top of mind, it is notable that we are seeing such heightened awareness of mental health and a recognition of the importance of people in building, sustaining, and growing a business.
“But addressing all these challenges requires a financial safety net. Something that too few businesses are in a position to build. Some can be delayed or simply patched for the short-term. But, for those issues deemed business critical, it is imperative that finance providers are at hand. By being able to rapidly and accurately assess requests, and then deliver the appropriate financing, they can help ensure that SMEs are in a position to thrive when the sun finally comes out.”