Small and medium-sized firms countrywide seem to be taking supply chain issues and increasing costs ‘in their usual resilient stride’, a UK business lender says.
MarketFinance asked 1,000 SME owners across the UK how they were managing rising supplier prices and what measures they had put in place, and sought their long-term outlook on the increasing costs of doing business.
Four out of five (79%) SMEs have faced increased prices from suppliers over the past six months. An increase in the cost of raw materials was the top-ranked rationale for price increases by suppliers, followed by staff shortages, the ongoing impact of the pandemic slowdown and supply chain disruptions owing to a shortage of truck drivers. Across the UK, a quarter of SMEs reported supplier prices had almost doubled over the past six months.
A third of SMEs (32%) have been able to absorb the increased costs without passing them on to customers, suggesting that these businesses have the necessary cash reserves to handle the impact, MarketFinance says. Only a fifth (21%) are passing a portion of the increased costs on to customers.
Looking ahead to the festive season, SMEs feel they will be able to manage the situation but some could increase prices if the pressure gets too much. Two-fifths reported they could increase their prices by as much as 10% in the run-up to Christmas. Longer term, three-quarters (73%) of SMEs are already preparing for the current higher prices to be the norm until at least the end of next year. A third of SMEs (34%) have taken out loans or are using other finance facilities to manage the increased cost of doing business.
Anil Stocker, CEO at MarketFinance, said: “The current economic environment with rising costs is presenting some headwinds and headaches for SME owners but they are proving to be as resilient as ever.
“The vast majority have been thinking ahead and accounted for the longer term scenario, which will hold them in good stead to do business. It’s great to see that SME owners are taking the long view and preserving their customer relationships and managing suppliers by having a finance facility in place to deal with the overhead for now.
“The British Business Bank announced last week that it will extend its Recovery Loan Scheme to June 2022. This extension will give SMEs easier access to more affordable finance they need to continue running and growing operations in the face of ongoing challenges such as staff shortages and supplier price increases.”