Telling the truth about SME life today

How UK SMEs Can Effectively Navigate Some of the Biggest Challenges Impacting the Economy

growing a small business

Operating and growing a small business is never easy especially when economic and geopolitical uncertainties persist that are new to many entrepreneurs. While removing all COVID-19 restrictions was a sigh of relief for many small and medium-sized (SME) UK businesses, just as economic activity picked back up, the invasion of Russia into Ukraine put the world into a state of shock yet again.

There are many current challenges for UK businesses. Firstly, supply chain disruptions continue to impact trade. Secondly, rising inflation, which the Bank of England warns could reach 10% by the end of this year. Lastly, as wages fail to increase as fast as inflation, businesses can find it challenging to attract and retain skilled workers.

The economic backdrop remains uncertain for UK SMEs. However, despite these challenges, I believe UK SMEs can navigate these unprecedented times by managing their costs, streamlining business operations by using specialised technology solutions, and looking at alternative hiring options by appointing sub-contractors.

Supply Chain Crisis

With severe delays in manufacturing and shipping, supply chain upheavals show little sign of diminishing. However, to limit the impact of this crisis, UK SMEs can look at updating their outdated supply chain management practices and building more resilient networks.

Businesses can achieve this by upgrading time-intensive, manual processes with innovative technology solutions that can help automate and centralise data from their entire supply chains. Better visibility and timely sharing of data allow effective collaboration with suppliers and early identification of potential risks that could impact business operations.

Improved data sharing within the network not only allows to improve efficiency but also increases transparency and trust. This is because the technology solution in place will encourage suppliers to share and explain all the materials and procedures that go into making and delivering their products. This information will help you to be confident that your suppliers are trading ethically and meeting the set standards of safety.

Another key component for supply chain transparency is managing suppliers’ certifications to ensure awareness of the facilities in which your products are made. For e.g., check if your supplier’s services are ISO accredited. This will help you to identify whether their processes meet international standards of quality, safety, and efficiency.

Rising Inflation

With price increases felt across supply chains, it can be a difficult time for UK SMEs to efficiently manage business operations, absorb rising costs and maintain a focus on quality.

Many SMEs will look to review their cost base. This will no doubt include personnel. There is a real risk of saving at the wrong end which can leave gaps that expose businesses to severe issues, including instances of modern slavery in supply chains[1]. For e.g., workers being paid low wages is a simple form of exploitation but can easily be side-lined by SMEs looking to cut expenses where possible, often at the expense of internal standards and processes.

My advice: Be mindful of where to cut. One option can be downsizing of office space or moving to a less expensive location. Another is to introduce hybrid working policies which allow businesses to save on overhead costs,  while boosting employee productivity. According to research conducted by PwC, over 57% of global leaders said that they saw an improvement in their organisation’s workforce performance following the introduction of hybrid working policies2.

Above all, UK SMEs must be prepared to protect cash reserves for ‘what if…’ scenarios. These reserves will prove vital to cope with any unexpected supply chain risks and payments, such as sudden rise in raw materials or wages. As such, regularly review your pricing model to ensure you have enough margin to accommodate rising costs of supplies and re-evaluate your existing supplier contracts to assess whether you need to look at new options. Changing suppliers is often a good way to obtain a cost reduction and negotiate better terms and discounts in return.

Labour Shortages

It’s been the year of ‘the Great Resignation’, a term used to denote the unprecedented rise in the number of workers resigning from their jobs following the pandemic. In the UK, the total number of resignations hit a 12-year high in the third quarter of 20213. According to PwC, almost 20% of UK workers are still expected to quit their jobs in the next 12 months. 4

Subsequently, finding skilled workers has become a grave challenge for many businesses. SMEs, in particular, tend to rely more on local advertisements or personal recommendations to recruit new staff which can make it challenging to access a more diverse pool of talent.

According to our own research, the vast majority of UK SMEs do not use sub-contractors (72%)5, which can make it hard to fill in these gaps in the workforce. However, hiring an expert to work on short-term projects can be beneficial in terms of cost and efficiency.

As subcontractors are specialists in their sector, they are more likely to get the job done quickly and up to high standards. Although, as subcontractors trade independently, the onus of checking their compliance with health and safety legislation, and whether or not they are fulling their moral and legal obligations, will be with the company hiring them.

Do they have adequate insurance in place? Do they have a written health and safety policy? Do they intend on carrying out the work or will they also need to subcontract? Answers to some of these questions can help you to identify reliable subcontractors who can prove they have the required certifications, licenses, and insurance to carry out the work efficiently and safely.

You can further mitigate any potential risks by using innovative technology solutions that can help manage contractor relations and monitor company and contractor compliance levels in real-time.

Overall, by investing in people with the right skill set, whilst keeping your costs down, UK SMEs can build resilient businesses to navigate unexpected headwinds.

Trending

Topic

Related Stories

More From

Trending

If you enjoyed this article,
why not join our newsletter?

We promise only quality content, tailored to suit what our readers like to see!