Thames Valley businesses restructuring to cope with mounting cost pressures
According to new research from Grant Thornton UK LLP, a combination of inflationary pressures, rising interest rates, high energy costs, and ongoing supply chain issues are significantly impacting the financial viability of many businesses.
The leading business and financial adviser’s latest Business Outlook Tracker* found almost one quarter (24%) of mid-sized businesses in the Thames Valley have restructured their operations to face these challenges, with a further 37% having plans to do so.
29% of business leaders in the region have also already reviewed their headcount due to the impact of rising costs and inflationary pressures.
The survey recorded that optimism levels from respondents on their business’ funding position has dropped significantly to just 33%, which is a fall of -23 percentage points (pp) compared to August.
Many businesses are having to secure additional finance to work through the escalating costs facing the market, with 25% already having secured further funding and 35% planning to do so.
The strain on funding has also led to a considerable drop in investment expectations across most areas monitored by the Tracker. The most significant drops compared to the last round in August were seen in skills development (-22pp), recruitment (-20pp) and environmental, social and governance (ESG) factors (-11pp).
The number of businesses in the Thames Valley that are optimistic about the outlook of the UK economy has also plummeted -27pp, compared to August 2022.
Norman Armstrong, practice leader for Grant Thornton in the Thames Valley and Southampton, said: “Businesses in the Thames Valley are facing a long list of cost pressures, ranging from input cost price increases and high energy costs to rising interest rates and supply chain bottlenecks. All of this means that many businesses are being faced with increases from 5% to as much as 100% in some cases.
“The severity of the current market landscape is causing many firms in the region to restructure their operations and review their headcount. While these pressures are going to be with us for some time, there are some steps that businesses should be looking at if they’re not already. This includes reducing their debt level to counter interest rate rises, minimising energy usage and looking for efficiencies wherever possible.
“Right now, many Thames Valley businesses will be looking ahead and reviewing their budgets for the next 6-12 months. These forward plans should account for factors that may spring up in 2023, such as the energy bill relief scheme ending, and rising interest costs. To make sure that they weather this storm of cost pressures, business leaders need to be agile and proactive, as it is these dynamic businesses that will fare the best and ultimately emerge as more resilient, efficient organisations.”
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