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Facing the rising cost of business

Author: ICAEW

Published: 15 Nov 2022

Welsh companies are facing a crisis as the cost of doing business soars.

The results of our latest Business Confidence Monitor (BCM) for Wales (Q3 2022) show that sentiment has plunged back into negative territory as companies face challenges from input price inflation, staffing levels and skills shortages.

As our new Prime Minister settles into office, it is clear that both households and companies need immediate support to get through the next few months. The dramatic increase in energy and commodity prices are particularly affecting our manufacturing sector with large employers like Edwards of Conwy taking to social media to share their frustration and anger over rising energy costs.

As a country, we’re facing a crisis. Battered by the volatility of the last two years, our businesses simply cannot absorb these rising energy costs. Furthermore, staff turnover is a more of a challenge in Wales than any other part of the UK, affecting more than half of companies. Those surveyed reported that the availability of both non-management and management skills were also growing issues, impacting half and a third of companies respectively, with labour costs on the rise as a result of challenges with recruitment.

Our members have also reported difficulties with transport problems and said that the tax burden is also a growing challenge. Although both domestic sales and exports have increased over the last year, this is expected to slow over the coming months.

It is a worrying time for our economy. With inflation running at levels not seen for 40 years, ministers at Cardiff Bay and Westminster must work together to provide targeted support for struggling businesses and households to keep the lights on this winter.

Some may say that recessions are part and parcel of the economic cycle but with the Bank of England warning that the UK is expected to face its longest recession since the global financial crisis, the impact could be long-lasting with higher levels of unemployment and reduced demand for goods and services.

What’s needed is a new economic strategy for stronger, fairer and sustainable growth in a way that harnesses our strengths and our competitive advantages. Barriers to investment also need to be addressed as a matter of priority. Speed really is of the essence.

As a professional body for Chartered Accountants, we’ll continue to represent the views of our 3,500 members in Wales to make sure that the voice of Welsh business is heard and that our businesses get the help that they so desperately need.