New Covid variants, Brexit, inflation and interest rate hikes are likely to greet the UK’s small business owners over the coming months, says entrepreneur Piers Linney who makes his predictions for 2022?
It is clear Covid will be with us during 2022 and will continue to impact the economy in the foreseeable future, as we try to adjust to a new normal. With expected cycles of new variants, diminishing immunity and continuing pressure on the NHS, the focus will be on the Government to persuade people to get vaccinated.
They may even have to intervene through legislation, as has happened in many European countries. One way or another, we need a path to a new normal so that businesses can plan for the weeks, months and even years ahead. It remains to be seen what measures the UK Government will adopt to try and ensure high levels of vaccine uptake.
Government support
The impact on consumer-facing businesses, which depend on footfall and have suffered greatly during the past couple of years, needs to be reassessed. The Government has helped in a number of ways, thanks to the introduction of initiatives such as the Bounce Back Loan Scheme (BBLS), the Coronavirus Business Interruption Loan Scheme (CBILS), as well as furlough and business rate relief.
Yet these were extremely expensive to administer and no country can adopt a long-term policy of quantitative easing (printing money), without pushing up inflation even further. But perhaps the Government will have to re-visit some of these measures to ensure small businesses are supported throughout the forthcoming year.
The current shortage of skills and employees will get worse before it gets better
Employers must be able to attract and employ both unskilled and highly skilled labour, and sometimes it requires help from the Government to achieve this. According to the Recruitment & Employment Confederation (November 2021), 88% of recruiters said labour shortages were their biggest concern. Some 65% complained about a lack of skills within the available workforce, with 58% saying they have almost one-third more vacancies than before the pandemic.
Hopefully, new employment policies will make it easier for small businesses to attract labour with the right skills. Access to apprenticeship and training schemes will also help. This low supply of highly skilled labour will also drive-up salaries in key growth sectors, further increasing inflation.
Why technology is the key to success and survival for SMEs
Those businesses which have not embraced technology are likely to fall far behind their competitors, as the shift to online retail grows at a great pace. The existence of Covid has been a massive factor in driving more people to adopt online retail, but there are other reasons too.
One other major driver is the rise in the number of entrepreneurs who have embraced the internet as a tool for promoting and selling their products. These business owners have provided different generations of smart phone users with a quicker, and often less expensive, way to purchase goods from the comfort of their own living rooms.The high street will continue to shrink, with businesses needing to tap into the online market rather than rely solely on footfall to generate revenue.
Brexit fallout to continue
Brexit will affect small businesses across the UK during 2022, and sometimes in unexpected ways. Without an established operating framework for UK enterprises, we could witness trade frictions, which will increase input costs, along with the inevitable rise in prices. Business owners will be keen to secure clarity from Government, as they wait to sample what post-Brexit trading rules will look like.
Interest rates will rise
We saw an incremental rise of 0.25% in interest rates during December, while inflation is forecast to reach 6% in 2022. This depends on how inflation is measured, and every business I have been involved with has faced increased costs in excess of 6%. Any imminent increase in the UK’s interest rate will shift a lot more pressure onto small business owners. Many of these companies have already borrowed sizeable amounts of money, without any certainty about future cash flow.
Indeed, spending and the economy will prove difficult to get right in 2022. Any additional interest rate rise will have a material impact on the amount of debt the UK has accumulated since the start of the Covid-recovery. It may also reduce consumer demand, especially if the money saved during the pandemic remains in personal bank accounts.
Crypto regulation
The UK Government will start to take the complexity of crypto currencies more seriously. They will also start to understand the opportunities they bring, and will take steps to regulate the market. This will give more certainty to market participants.
The UK has certainly been behind the curve in this department. Mark my words: ‘crypto currency’ and ‘blockchain-based technologies’ will seriously change the world of finance. Nation states have adopted Bitcoin and the value of ‘flat currency’ continues to wane as quantitative easing and inflation erodes its value.
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