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Top challenges facing UK businesses in 2022

04/01/2022

Covid-19, the fallout from Brexit and late payment are just some of the challenges that UK businesses will face in 2022.

These issues, along with others, continue to put pressure on supply chains and cash flow in particular, and will all be occupying the thoughts of British businesses.

Here, we look at some of the biggest challenges for the year ahead and offer some tips on how you can overcome them.

Covid

While we had all hoped that we would be back to some kind of normal by now, it seems for businesses this could still be a long way off.

According to Marsh Commercial’s UK SME Risk Report, businesses continue to see the impact of Covid as a critical external risk.

One in three businesses (36%) said that continued fallout from Covid, such as further lockdowns or disruption to day-to-day business operations, is considered the most critical external risk, and 29% said that managing this risk is deemed a top priority.

While there’s not much you can do to prevent Covid-related restrictions on your business, it is possible to plan ahead to limit the disruption and damage that any continued fallout might cause.

What can you do?

1. Review your performance and update your business continuity plan

Look back and review your business’s response to Covid (or any other external challenges) so far. What have you done well? And what could you have done differently? Understanding the strengths and weaknesses of your performance and approach will allow you to develop a better business continuity plan for any future disturbances.

Learn more about business continuity planning.

2. Assess the risks in your supply chain

Covid has had a significant impact on supply chains across the world and many of these issues remain ongoing, with suppliers and customers alike under intense pressure. Look at your supply chain and consider how you could reduce any risks. For example, could you identify alternative or additional suppliers? Or could you further reduce your risk by developing parts internally?

Discover how to protect your business against supply chain disruption.

3. Be flexible

Whether it’s Covid or another external challenge that is impacting the way your business operates, it’s essential to be able to adapt. Being flexible with your approach and maintaining a steady stream of income could reduce the financial impact on your business and increase your chances of survival.

Brexit

Since the UK left the European Union on 31 January 2020, 31% of SMEs have experienced supply chain delays, with 22% suffering reduced trade and 19% seeing a decrease in cash flow. And, despite how much time has passed, it appears that these issues remain a huge concern for businesses.

According to Marsh Commercial’s UK SME Risk Report, 56% of SMEs admitted that they remain worried about ongoing and future Brexit-related risks.

The greatest worry for businesses is concern about the continued economic impact (29%), followed by an impairment of the ability to trade in Europe (25%) and potential border delays (25%).

These concerns are echoed in research by the Institute of Directors (IoD), who found that nearly a third of British companies that import goods from the EU are “not at all prepared” for full post-Brexit customs checks. This is sparking fears of increased congestion at ports and further supply chain disruption.

From 1 January 2022, companies that import goods can no longer take advantage of a temporary six-month grace period allowing them to delay making customs declarations to HMRC and paying any tariffs due. They now must do so immediately.

What can you do?

1. Ensure you are complying with new rules

With the grace period now over, you should be following all the new rules on exports, imports, tariffs, data and hiring. If you are struggling to understand or implement the new rules you are not alone. The best way to overcome this confusion and get to grips with new processes is to immerse yourself in the information that’s available and seek professional support from an expert where necessary. This could save you lots of time, resources and stress.

2. Consider trade finance

Brexit has caused many foreign suppliers to increase their prices, shipping costs have gone up and many companies are experiencing supply delays. For many businesses, this means that the cash flow gap between paying suppliers and getting paid has become more difficult to manage. Fortunately, trade finance solutions exist which allow importers and exporters to keep cash flowing when trading internationally.

Learn more about trade finance and how it could help your business.

Late payment

Late payment has always been an issue for businesses, but in many ways the coronavirus pandemic has exacerbated the problem. And, with most of the government support schemes now over or coming to an end, many business experts expect this to worsen.

According to Time Finance, one in three businesses see late payment as one of their biggest threats to survival.

Their research showed that for 70% of SMEs, late payments are a recurring issue leading to more severe consequences, with over 40% worrying about their own cash flow as a result.

Remember that all the challenges mentioned in this article will also affect other businesses in one way or another. This means that you can’t confidently rely on any of your customers to make payments on time, or even at all.

That’s why it’s arguably more important than ever to be taking steps to protect your business from late payment.

What can you do?

1. Prioritise your credit management

An efficient and effective credit management strategy provides the foundation for avoiding late payments and bad debt. Make sure you’re always invoicing promptly and accurately and that you contact each customer before the due date to confirm their intentions to pay.

It’s also wise to have a plan in place for when invoices go overdue. This will allow you to work quickly and effectively to recover your money.

2. Be cautious

It’s more important than ever to know your customers and supply chain. Being able to identify issues with payments early and having open conversations will give you the best chance of protecting your cash flow. Against this backdrop, you might also want to consider credit insurance, which protects your cash flow if customers in the supply chain don’t pay, whether due to insolvency or protracted default.

Discover how to tell if a customer is in financial difficulty

3. Bring in some added expertise

Unfortunately, sometimes no matter how hard you try some customers just won’t pay. These trickier, time-consuming debts could benefit from the added weight of a debt collection agency. Or, if the process of chasing customers is taking too much time and resource away from your business, you could explore outsourcing your credit control function to a specialist agency.

Learn more about debt collection solutions  

Cash flow pressure

All of the challenges mentioned above are putting increasing cash flow pressure on businesses across the UK.

Combine this with rising costs and additional pressures as a result of recently having to bring staff off furlough, restocking inventory, refurbishing premises and repaying CBILS/BBLS loans, it’s not hard to see why many businesses are facing a cash flow crisis.

What can you do?

1. Be proactive

Don’t wait until the cash flow pressure starts to build to think about your next steps. Be proactive now and start thinking about your forthcoming working capital needs.

It’s the steps taken now that will determine the survival of individual businesses and ultimately the recovery of the economy.

2. Improve your cash flow management

Unfortunately for businesses, with all the challenges mentioned above creating widespread uncertainty, the future is still so unclear. This can make managing your cash flow increasingly difficult. But it’s also why focusing on your cash flow is so important right now.

To stay in control of your finances ensure that you are consistently updating your cash flow forecasts, budgets and sales ledger. This will help you get a better indication of any upcoming cash flow problems and give you the insight needed to put plans in place to reduce the impact.

Learn how to master your cash flow in 7 days

3. Review your existing finance

It’s always important for businesses to regularly benchmark and review their funding to ensure they continue to benefit from the most suitable and cost-effective funding available for their evolving needs.

But, given how much has changed in recent months and years, it could be more beneficial than ever.

Refinancing any outstanding loans, for instance, could allow you to access lower monthly payments, adjust the term length, reduce the overall cost of borrowing or benefit from a more convenient payment structure.

Discover why, when and how to refinance your business loans

Can we help?

If you are concerned about your cash flow or confused about your finance options, we can help.

As an independent, FCA-regulated commercial finance broker we specialise in helping businesses find the right funding solution, and at a time when many people are confused and nervous about the future, our services could be the support you’re looking for.

To speak to our expert team, call 0800 9774833 or request a call back at a convenient time here.

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Some of the funders we work with

  • Sonovate
  • Accelerated Payments
  • PNC Business Credit
  • Bibby Financial Services
  • Santander Corporate & Commercial
  • Asset Advantage
  • Shawbrook Business Credit
  • Davenham Asset Finance
  • InvoCap
  • Close Brothers Invoice Finance
  • Regency Factors
  • Nucleus Commercial Finance
  • IGF Invoice Finance
  • Woodsford Tradebridge
  • Investec
  • MarketFinance
  • Team Factors
  • Partnership Invoice Finance
  • Boost Capital
  • Secure Trust Bank
  • Davenham Trade Finance
  • Roma Finance
  • Aldermore Invoice Finance
  • Trade Finance Partners
  • Ultimate Finance Group
  • Time Finance
  • Pulse Cashflow Finance
  • FIBR Tech Limited
  • Haydock Finance Ltd
  • Metro Bank SME Finance
  • 4Syte
  • MaxCap
  • Blazehill Capital
  • Merchant Money
  • Clear Factor
  • Barclays
  • Skipton Business Finance
  • Optimum Finance
  • Giant
  • Royal Bank of Scotland
  • Berkeley Trade Finance Ltd
  • Leumi ABL
  • iwoca
  • Peak Cashflow
  • ABN AMRO Commercial Finance
  • Lloyds Bank Commercial Finance
  • inFund
  • Creative Capital

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