UK businesses fear supply chain chaos will ruin Christmas trading

UK businesses are anxious that supply chain chaos and soaring costs that have punctuated this year will scupper the lucrative Christmas trading period, a new survey out late last night revealed.

Nearly half of British firms are concerned about the rising cost of sourcing materials to produce products, making it the most common problem businesses are sweating over, according to consultancy BDO.

A shortage of key materials such as semiconductor chips caused by supply chains struggling to get back to full strength after the pandemic and a lack of workers hamstrung UK businesses throughout this year.

Strained trade flows have been compounded by rising energy costs caused by Putin’s invasion of Ukraine and soaring inflation sending a chill through consumer spending.

“2022 was meant to be the year of recovery for both businesses and the wider economy. Instead, they continue to weather tough challenges, such as an energy crisis, political uncertainty and record levels of inflation,” Ed Dwan, partner at BDO, said.

Retail, leisure and hospitality firms are sceptical about reaping the rewards of shoppers spending big over the festive period. Many of these firms generate most of their profits during Christmas.

One in three pubs, bars and restaurants reckons Brits will cut back this year, BDO said. Many of these companies are still yet to recover from Covid-19 lockdowns wreaking havoc on their balance sheets.

Prices have risen 11.1 per cent over the year to October, the fastest acceleration in 41 years, far outstripping pay growth, putting strain on household finances.

The Bank of England has raised interest rates eight times in a row to tame high inflation in the UK. However, this aggressive tightening cycle is heaping pressure on businesses’ bottom lines.

Just under a fifth of businesses are taking on new debt despite nearly a third worrying they will be unable to repay lenders due to higher borrowing costs.