It is certainly a time of change and challenge for UK’s SMB industry, this week’s news alone has brought the UK a date for triggering Article 50 (Brexit) as well as a reported rise in inflation. With the Budget news about UK business rate changes as another possible external pressure, it is a time to ensure that as a business, your financial health is known, robust and secured in the long term.
In this blog we will highlight some of the key factors impacting a typical UK SME today, and cover off some trends and analysis that will add some context to assist in your own financial planning.
What is the labour market impact and outlook on business?
Following the recent published ONS UK labour and employment figures, Christian Spence (Head of Research and Policy) from the Greater Manchester Chamber of Commerce commented “The labour market in the UK continues to be perhaps the greatest single success of the economy post-recession. Employment continues to rise and unemployment and inactivity continue to fall.”
Christian goes on to highlight two key challenges for employers – the other side of the coin of a contracting resource pool – is that the skills gap currently experienced (particularly within construction and manufacturing sectors) will not improve in short term, plus with a decreasing input of EU labour after the Brexit vote, competitive growth and productivity from this avenue looks set to slow further.
The cost of employment for business is also under pressure from auto-enrolment measures, pension funds corrections, apprenticeship levy and the national minimum wage. This direct impact on the bottom line either affects productivity, cost to customer of your goods and services or drives a change in your proposition.
What has the latest Budget brought in terms of UK business rate changes?
From April 2017, there will be a revaluation of business rates in Britain, to reflect changes in the property market. This was delayed from 2015 to avoid the General Election and has been met with resistance from the business community. In response the Government announced some relief measures and will plan to change the entire system later in the year.
What is the outlook for UK inflation and how will it affect business?
February figures published recently by ONS show that the UK inflation rate rose to 2.3% from 1.8% in January. Whilst the Bank of England has urged caution within any reaction to raise interest rates, if production costs are increasing then the inflation trend is look set to continue, squeezing disposable income and affecting purchasing decisions within grocery and service sectors. Predictions by end of 2017 range from 2.8% to 3%.
For business, there is a risk of a squeeze between wage increase expectations from a pressurised workforce and a reduction in sales.
Confidence is still solid in certain sectors
According to a recent article in Manufacturing & Logistics IT SMEs within manufacturing are optimistic about opportunities going forward; “almost half of SMEs (49%) across the manufacturing sector have aspirations for growth over the next three months, compared with only 31% six months ago… the percentage of SMEs anticipating decline is also down from 12% to 9%, suggesting improved levels of confidence within the sector.”
Prodware recently blogged about our attendance at the International Trade Forum at the Greater Manchester Chambers of Commerce, and confidence was an area that was discussed. “At the start of Q1 2017 order books so far are showing a bounce back in manufacturing and showing stronger growth in export markets. In the 2016 Autumn statement, there was a budgeted investment announcement of £4.9m in R&D – which will also positively impact pharmaceuticals manufacturing.”
So, there are areas of confidence, it is up to business to shape their short, medium and long term strategy in accordance with global and local economic factors and to get their financial visibility strong enough to help them see the opportunities.
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