In 2011 the boss of global telecoms giant Nokia was talking to staff about the collected crises they faced.
In a phrase which has entered the lexicon of business-speak, he said they were ‘working on a burning platform.’
I mention this today because all over Wales, small businesses especially are beginning to feel an uncomfortable warmth through the soles of their feet that has nothing to with the recent hot spell.
All over the country a growing accumulation of challenges – including rising costs, cash flow and supply chains to name just three – are turning up the heat on SMEs. And they are sweating on the future.
At ACCA we receive first-hand evidence of this through the monthly opinion tracker we carry out among SMEs alongside the Corporate Finance Network (CFN).
It reveals that UK SMEs have suffered a drop of 20% in growth. In April this year 94% were actively looking to grow their business. That’s now at 75%, which, linked to the rise in prices, raises the prospect of the ugly S word – stagflation.
The monthly survey, which polls accountancy professionals on the financial outlook of their SME clients, shows that a large proportion of UK SMEs are experiencing mounting concerns about the economy. A further 7% of UK SMEs predict they will run out of cash in the next 12 months, raising considerable concern for their survival.
Stagnation is felt across many areas. In recruitment, just 12% of SMEs anticipate taking on more people. This is another sharp decline, from 37% earlier this year in March and serves as a strong signal about investment. Similarly, training programmes have experienced a standstill, with almost half of businesses admitting to not finalising recruitment and training programmes for the next six months. This all points to the fact that SMEs are operating in crisis mode – that classic burning platform.
Continuing economic uncertainty and supply chain disruption means it’s now crucial to ensure the right support is in place to encourage SME investment. With the existing UK Government ‘super-deduction’ incentive due to end next spring, firms need an early answer on its replacement.
The decline in SME optimism has clearly had an impact on business investment. The stark recruitment figures demonstrate the stalling of investment in other lines of business and this is also filtering down to its people in terms of recruitment and development programmes.
Businesses are dealing with soaring costs as well as supply chain bottlenecks, which are having a huge impact on how they conduct business in a timely manner – as well as their ability to make capital investments.
Our businesses need some certainty in these uncertain times. Ultimately, employment, training and other investment tax reliefs and capital allowances should extend into the next parliamentary term.
The next Chancellor needs to prioritise creating certainty to invest and to extend investment opportunities, which will be crucial to economic recovery as well as sustained growth.
Until then, everyone in business must do their best to look ahead and keep a cool head, even while temperatures rise.
It doesn’t pay to ignore cyber crime
Businesses of all sizes and in all sectors are increasingly vulnerable to cyber attack.
The most recent figures from the UK government showed that in the last 12 months, 39% of UK businesses were targeted by digital crooks.
The most common threat was phishing (83%) – illicit attempts to extract data with criminal intent. Others include denial of service, malware or ransomware.
Within organisations reporting cyber attacks, 31% say they were attacked at least once a week. One in five suffered a loss – financial or reputational or both.
Despite the growing awareness of the risks, many SMEs do not prioritise cyber security support (or insurance), because of cost. Or they don’t believe they need it. With all the other pressures now the need for cyber security may be neglected, but it should be an essential part of a business’s operation.
ACCA works closely with partners such as the National Cyber Security Centre and PureCyber to make accountants aware of the steps they need to protect their systems, and to educate staff and clients on the importance of vigilance. We know that cyber criminals target accountancy practices at particularly busy times of the year, such as month end or year end.
Wales already has a thriving cybersecurity cluster, with firms such as PureCyber and Awen Collective collaborating with universities and colleges to develop skilled graduates to support the growth of the sector, with support from the Welsh and UK governments.
This is demonstrated by the recent appointment of PwC by Cardiff Capital Region (CCR) to run its Innovation Investment Fund (IIF) over an initial five-year period.
The £50m fund will support job creation, upskilling, social inclusion and meeting wider environmental goals. It will fund innovative and established businesses and prioritise firms in key growth areas – including cybersecurity – as well as the creative industries, fintech, medtech and compound semiconductor production.
It’s important to remember that while cyber security is a product of the virtual world – its consequences are disturbingly real.