In addition to the stress, anxiety, disruption, and host of other challenges that the coronavirus pandemic imposed on all of us, it was expensive. A recent estimate by Simply Business suggests that the cost of restrictions on businesses exceeded £126.6 billion, averaging out to approximately £22,461 for each company.
In the wake of Freedom Day in July, and as the percentage of vaccinated Brits ticks up, it’s clear that we’re entering a new chapter in the Covid saga. Naturally, businesses want to know what’s next, so here are some things to consider in the months ahead.
Unforeseen costs and redundancies
Unfortunately, it’s unlikely that the pandemic’s costly consequences are over just yet. Of the 1,050 SMEs we recently surveyed at Equals Money, 91% have had to pay significant unexpected costs during the Covid crisis. While government support softened the blow, the CBILS has now ended, and the furlough scheme is due to end in September, so costs may tick up again.
Over a third (37%) of businesses we heard from expect the cost of employee salaries to increase in the months ahead. As the jobs market reopens, businesses will likely spend more on hiring ‘ and counteroffers. For businesses that anticipate redundancies as the furlough scheme ends, now is the time to begin planning. The same goes for businesses looking at hiring: pay attention to trends in the market and plan accordingly.
Other common expenditures that business decision-makers expect to increase include expenses (32%), office supplies (30%), and IT equipment (30%) ‘ all fairly expected given the return to the office. Some businesses are considering moving online entirely which, by Hitachi Capital’s estimate, could save up to £840 per month. Conversely, many businesses will consider this a worthwhile investment given the benefits of being in the same space.
A shifting international economic landscape
While the Covid pandemic may be largely under control in the UK, the international economic landscape still presents a significant source of uncertainty. Since Brexit came into effect in January, over three in four businesses (76%) reported that overseas suppliers had raised prices. A third of businesses (33%) saw prices increase in excess of 10%.
Managing the additional post-Brexit costs will require businesses to make difficult decisions. The FSB has warned that in extreme cases, SMEs may even have to move to an EU-member state to remain viable. However, after years of uncertainty surrounding Brexit, there is benefit in knowing the exact nature of the regulation, and businesses can now confidently make decisions on their international supply chains and delivery networks.
In addition to Brexit, global economic shifts will inevitably continue, especially as the pandemic is an ongoing concern in many parts of the world. This will likely involve unexpected shocks to goods, such as the continuing computer chip supply crisis and wood shortage.
What can small businesses do to stay prepared?
With the right systems, processes and technology in place, SMEs can get back to normality without breaking the bank. However, managing cash flow ‘ something that businesses have become accustomed to over the past 18 months ‘ will remain a high priority.
Maintaining a healthy cash flow depends on gathering insights from existing data so a business can anticipate and accurately forecast spending. While shifting variables like Brexit and the ending of the furlough scheme can make this more difficult, businesses with effective data-management practices will have an advantage.
Adopting modern, data-focused solutions for accounting, expenses, invoicing, and other regular tasks can ensure that businesses have the data they need. Businesses can also look to international currency markets as a useful early indicator of developing trends.
In particular, the return to the office is also an opportunity for SMEs to implement a modern expense management system. These systems ensure that SMEs have complete visibility over spending, and they are far faster and simpler for both employees and the business.
What’s next for the UK’s SMEs is anybody’s guess, the worst of the Covid-era turbulence should be over, so it’s time to review costs, preserve cash and adopt spending habits and processes with an eye toward the long term. Businesses that remain flexible, future-focused, and attentive to their cash flow, will be well on the way to success in 2022 and beyond.