Nucleus flags concerns as rising costs threaten SME growth
Nucleus Commercial Finance has led calls for more support for small businesses, after it was revealed that business costs are rising at the fastest pace on record.
According to the latest research by the Confederation for British Industry (CBI), rising costs and supply chain issues mean that just 70 per cent of small- and medium-sized enterprises (SMEs) have enough resources to meet demand in the coming months – lower than at any other time in the CBI’s SME Trends Survey history.
Unit costs in the three months to October rose at the fastest pace on record, and eight in 10 small firms think costs will continue to accelerate over the next quarter.
However, there were some bright spots. Growth remains solid in comparison to the long-run average, and is also expected to pick up again in the coming quarter.
Furthermore, total new orders growth also remained firm, and SME manufacturers expect total new orders growth to be maintained at a similar pace next quarter.
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“Although fears of Covid seem to have faded for businesses over recent months, supply chain challenges and skills shortages are significantly knocking SME confidence, particularly in the manufacturing and construction sectors,” said Chirag Shah, chief executive of Nucleus Commercial Finance.
“Adding to SMEs’ woes is the end of the furlough scheme and the knock-on effect this is having on uncertainty in the labour market.
“While government measures have gone some way to combat this in the short-term, with steps to resolve HGV driver shortages and extra support measures for certain sectors, we’re not out of the woods yet.
“Looking ahead, it’s vital that government and industry work together, to provide businesses with the support and access to finance they need to boost their confidence and optimism, invest in their futures and stimulate economic recovery.”
Almost two-thirds of SME manufacturers reported concerns that supply of materials and components could impact output in the next three months – the highest share since records began in 1988.
46 per cent of SMEs told the CBI that they were worried about the availability of skilled labour. This represents the highest figure in the survey’s history.
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The CBI also reported that business sentiment was broadly flat after having grown rapidly in the past two quarters. Investment intentions for the year ahead softened somewhat on the previous quarter, but generally remained strong.
“The optimism of summer has given way to an uncertain autumn for SMEs in the manufacturing sector, as firms struggle with persistent supply challenges and acute cost and price pressures,” said Alpesh Paleja, lead economist at the CBI.
“It has been encouraging to see government recognise the issues facing businesses and begin to take action to address supply chain issues and skills shortages. Creation of the new supply chain taskforce is a welcome step, and crucially utilises expertise in understanding and addressing these challenges.
“Business and government working together is the best way to restore momentum to the UK recovery, and move towards building the high-wage, high-skill, high-investment, high-productivity economy that we all want to see.”
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