A shift in customer spending is one of the biggest challenges facing Midlands businesses over the next six months, as the cost of living crisis continues to bite.
According to BDO LLP’s bi-monthly Economic Engine survey of 500 mid-market businesses, more than half of regional companies (59%) said a decision by customers to cut back on spending is their biggest concern.
Supply chain issues also continue to cause a significant headache for 31% of Midlands businesses, as problems such as delayed deliveries, stock shortages and cost increases, persist in the market.
The survey by the accountancy and business advisory firm found that as purse strings tighten, businesses are having to explore ways to save money in the coming months.
More than a third of Midlands businesses (36%) are reducing their energy usage as a way of cutting overheads, with 49% admitting that they are tapping into Government support schemes, such as the Energy Bills Discount Scheme and the Industrial Energy Transformation Fund, to ease the pressure.
The knock-on effect of rising costs is that 38% of Midlands businesses are being forced to shelve expansion plans, such as eyeing international markets, as they attempt to balance the books.
Kyla Bellingall, regional managing partner in the Midlands, said: “Customer spending habits have always dictated how many regional businesses approach day-to-day operations and longer term growth.
“As the battle with inflation continues to impact all facets of the regional economy, Midlands companies are having to be laser focused on business priorities for the remainder of 2023, with debt financing and restructuring workforces at the top of the list for businesses.
“What is reassuring to see is, despite the continued pressures facing businesses, growth ambitions remain firmly on the agenda, with 28% of Midlands companies looking to recruit more people with the right skills, as a way of meeting strategic aims.”
However, according to BDO’s Economic Engine survey, Midlands businesses still believe the Government has a significant part to play in helping the regional economy to weather the ongoing storm.
Bellingall added: “Midlands businesses recognise that in order to bring in the right talent there needs to be a concerted effort on the Government’s part to provide support around specific skills shortages facing certain market segments, whether that’s additional funding for apprenticeships, or more investment in education for specific roles.
“Central to future success in the region is the ability for businesses to remain ambitious, focused on growth, and hungry for innovation. Unsurprisingly, 34% of Midlands businesses want the Government to offer more financial support to help them meet those specific aims.
“Without more generous funding packages, replacing the likes of Horizon Europe, then regional businesses will continue to struggle in the face of ongoing pressures.”
