With Wales back at Alert Level 0, it’s back to ‘business as usual’. But what does business look like after almost two years of a global pandemic?
We take a look at the challenges and opportunities facing businesses in Wales in 2022.
A continued rise in inflation is a worry for SMEs who are balancing the rising costs of raw materials, wage inflation and supply chain shortages driving up prices among other challenges. In Q4 of 2021, 64% of businesses in Wales told us that inflation was more of a concern to them than it had been previously.
These sentiments have been reflected in the recent Business Outlook 2022 survey organised by the British Chambers of Commerce. Welsh businesses stated that they are facing pressure due to rising costs of raw materials (55%), utilities (61%) and remuneration for staff retention (65%).
In response, 71% of businesses will be increasing prices of their own goods and services, with 60% seeking to increase sales. Although assistance for the cost-of-living crisis has not been extended beyond households to SMEs, businesses have an optimistic outlook with 0% of those surveyed considering ceasing trading.
In the latter half of 2021, a shortage of HGV drivers sparked concerns about supplies in the lead up to Christmas.
In Q4 of 2021, 50% of SMEs in Wales stated that they had been impacted by supply chain issues caused by a lack of HGV drivers. 85% of businesses experienced delays and 70% of businesses faced increased costs receiving or sending goods. These results reflected those of a BDO survey of 500 businesses which suggested that two thirds of mid-sized firms expected supply chain strains among other issues to hamper trade in the beginning of 2022.
While supply chain issues are likely to persist in the first half of the year, according to Maersk CEO Søren Skou, there are encouraging signs that action is being taken to address driver shortage. The Road Haulage Association has estimated that the shortage has been reduced from 100,000 to 80,000 drivers and the UK Government has invested £34 million to help train approximately 11,000 HGV drivers through bootcamps.
2022 marked the introduction of new Customs regulations and controls for trading with the European Union, affecting the 51% of Welsh businesses who trade with countries inside and outside of the EU and the 10% who solely export products and services to the EU.
However, there is discontent among Welsh businesses regarding the UK-EU Trade and Cooperation Agreement. 41% of businesses strongly disagreed that the agreement is enabling their organisation to grow or increase sales and, when asked which market the UK should pursue trade deals with, 46% suggested that the UK Government should prioritise modifying the current deal with the European Union.
To help businesses export and import successfully going forward, with the EU or elsewhere, we launched a series of international trade training courses. The courses, which are HMRC aligned and offer opportunities for accreditation, are designed to provide firms with the skills and confidence to deal with fundamental trade processes and documentation.
As we edge closer to the targets for the public sector (2030) and Wales (2050), achieving net zero will be high on the agenda of businesses.
SMEs may already be on their sustainability journeys due to net zero targets elsewhere in their supply chain, procurement requirements or as part of their CSR goals.
In the short term, moves towards a circular economy can be made by changing business cultures. Financial incentives and support would be welcome for larger scale, long-term investments to help SMEs progress innovative solutions.
To help businesses on their way to achieving net zero, we have brought together industry experts to provide advice and guidance through events, such as the upcoming webinar ‘Why Net Zero is good for business’, and the third edition of Informed.