According to new research from leading business and financial adviser Grant Thornton UK LLP, a combination of inflationary pressures, rising interest rates and high energy costs, and ongoing supply chain issues are all significantly impacting the financial viability of many mid-sized businesses.
Grant Thornton’s Business Outlook Tracker*, which surveyed 605 businesses in October 2022, found that, in the face of these mounting pressures, one third (33%) of respondents have already restructured their operations and reviewed their headcount, with a further 38% having plans to do so.
The survey recorded the lowest level of optimism from respondents on their business’ funding position since the survey began in January 2021 – dropping significantly (-16 percentage points) compared to August 2022, to just 59%.
Many businesses are having to secure additional finance to work through the escalating costs facing the market, with 33% already having secured further funding and 41% planning to do so.
The strain on funding has also led to a considerable drop in investment expectations across all areas monitored by the Tracker. The most significant drops compared to the last round in August 2022 were seen in technology (-13pp), skills development (-12pp) and employee wellbeing (-10pp). There was also a -5pp drop in the number of businesses planning to increase investment in employee reward and benefits.
But investment looks to be being directed to areas that will have the most impact on reducing costs. Over two thirds (71%) of respondents have already invested, or are planning to invest, in productivity, efficiency and automation.
In the face of increasing costs and ongoing changes to government fiscal policy, the number of businesses optimistic about the outlook of the UK economy has also plummeted -10pp, compared to August 2022.
Chris Petts, Restructuring Partner, Grant Thornton UK LLP, said:
“Businesses are facing incredible cost pressures from all sides. The combination of input cost price increases, high energy costs and rising interest rates, are seeing businesses faced with increases from 5% to as much as 100% in some cases, when combined with the added strain of ongoing supply chain shortages in some areas. The severity of the environment is clear, with the majority of those surveyed either planning to restructure their operations, or already having done so.
“There isn’t one solution to fix these issues but there are always sensible steps that businesses can take to start to rebuild confidence. For example, reducing the businesses debt level to counter interest rate rises, reducing energy usage and looking for efficiencies in the face of energy cost rises, and considering alterative, cheaper suppliers.
“Many businesses are also reviewing their budgets for the next 6-12 months. It’s vital that these forward plans account for assumptions that may need to be made over this period, such as the impact of the end of energy bill relief, and rising interest costs. Businesses need to be proactive and take action where they can, rather than burying their heads in the sand – its these businesses who will work their way through this challenging environment, and emerge a more resilient, efficient organisation.”
*The Grant Thornton Business Outlook Tracker is a bi-monthly survey of mid-market businesses. Censuswide (on behalf of Grant Thornton UK LLP) surveyed 605 senior decision makers in UK mid-market businesses between 29 September – 10 October 2022. The UK mid-market is defined as companies with an annual turnover between £50 million - £500 million.
News release
1 in 3 mid-sized businesses plan to restructure as cost pressures mount
18 Oct 2022
According to new research from leading business and financial adviser Grant Thornton UK LLP, a combination of inflationary pressures, rising interest rates and high energy costs, and ongoing supply chain issues are all significantly impacting the financial viability of many mid-sized businesses.
Grant Thornton’s Business Outlook Tracker*, which surveyed 605 businesses in October 2022, found that, in the face of these mounting pressures, one third (33%) of respondents have already restructured their operations and reviewed their headcount, with a further 38% having plans to do so.
The survey recorded the lowest level of optimism from respondents on their business’ funding position since the survey began in January 2021 – dropping significantly (-16 percentage points) compared to August 2022, to just 59%.
Many businesses are having to secure additional finance to work through the escalating costs facing the market, with 33% already having secured further funding and 41% planning to do so.
The strain on funding has also led to a considerable drop in investment expectations across all areas monitored by the Tracker. The most significant drops compared to the last round in August 2022 were seen in technology (-13pp), skills development (-12pp) and employee wellbeing (-10pp). There was also a -5pp drop in the number of businesses planning to increase investment in employee reward and benefits.
But investment looks to be being directed to areas that will have the most impact on reducing costs. Over two thirds (71%) of respondents have already invested, or are planning to invest, in productivity, efficiency and automation.
In the face of increasing costs and ongoing changes to government fiscal policy, the number of businesses optimistic about the outlook of the UK economy has also plummeted -10pp, compared to August 2022.
Chris Petts, Restructuring Partner, Grant Thornton UK LLP, said:
“Businesses are facing incredible cost pressures from all sides. The combination of input cost price increases, high energy costs and rising interest rates, are seeing businesses faced with increases from 5% to as much as 100% in some cases, when combined with the added strain of ongoing supply chain shortages in some areas. The severity of the environment is clear, with the majority of those surveyed either planning to restructure their operations, or already having done so.
“There isn’t one solution to fix these issues but there are always sensible steps that businesses can take to start to rebuild confidence. For example, reducing the businesses debt level to counter interest rate rises, reducing energy usage and looking for efficiencies in the face of energy cost rises, and considering alterative, cheaper suppliers.
“Many businesses are also reviewing their budgets for the next 6-12 months. It’s vital that these forward plans account for assumptions that may need to be made over this period, such as the impact of the end of energy bill relief, and rising interest costs. Businesses need to be proactive and take action where they can, rather than burying their heads in the sand – its these businesses who will work their way through this challenging environment, and emerge a more resilient, efficient organisation.”
*The Grant Thornton Business Outlook Tracker is a bi-monthly survey of mid-market businesses. Censuswide (on behalf of Grant Thornton UK LLP) surveyed 605 senior decision makers in UK mid-market businesses between 29 September – 10 October 2022. The UK mid-market is defined as companies with an annual turnover between £50 million - £500 million.