Member Article

East of England businesses restructuring to cope with mounting cost pressures

According to new research from Grant Thornton UK LLP, a combination of inflationary pressures, rising interest rates, high energy costs, and ongoing supply chain issues are significantly impacting the financial viability of many businesses.

The leading business and financial adviser’s latest Business Outlook Tracker* found that just under one third (32%) of mid-sized businesses in the East of England have restructured their operations, with a further 26% having plans to do so.

In addition, 22% of business leaders in the region have reviewed their company’s headcount and another 40% intend to do the same.

The survey recorded that optimism levels regarding the funding position of businesses dropped to just 46%, which is a fall of -28 percentage points (pp) compared to August.

Many businesses in the region are also having to secure additional finance to work through the escalating costs facing the market, with 30% already having secured extra funding and 34% planning to do so.

The strain on funding has led to a considerable drop in investment expectations across almost all areas monitored by the Tracker. The most significant drops compared to the last round in August 2022 were seen in plant, machinery and new buildings (-22pp), employee wellbeing (-22pp) and employee rewards and benefits (-16pp). There was also a -14pp drop in the number of businesses planning to increase investment in ESG factors.

But investment seems to be being directed to areas that will have the most impact on reducing costs. Just under two thirds (62%) of respondents have already invested, or are planning to invest, in productivity, efficiency and automation.

The number of businesses in the East of England optimistic about the outlook of the UK economy has also plummeted -30pp, compared to August 2022.

James Brown, Partner and Practice Leader at Grant Thornton UK LLP in the East of England, said: “Businesses in the East of England are facing a long list of cost pressures, ranging from input cost price increases and high energy bills to rising interest rates and supply chain bottlenecks. All of this means that many businesses are being faced with increases ranging from 5% to as much as 100%.

“The severity of the situation is causing many firms to restructure their operations and review their headcount. While these problems are going to be with us for some time, there are steps that businesses can explore in order to rebuild confidence. This includes reducing their debt level to counter interest rate rises, minimising energy usage, looking for efficiencies wherever possible, and considering alternative, cheaper suppliers.

“Right now, many East of England businesses will be looking ahead and reviewing their budgets for the next 6-12 months. These forward plans should account for factors that may spring up in 2023, such as the energy bill relief scheme ending, and rising interest costs. Thankfully, I know that this region is full of proactive, agile and dynamic businesses that will take on the challenges and emerge as more resilient, efficient organisations.”

This was posted in Bdaily's Members' News section by John Robson .