Blog • 19.12.22

The Cost of Living Crisis Adds More Pressure and Volatility for Businesses

Just as businesses were beginning to rebuild and recover from the pandemic, along comes a looming recession and cost-of-living crisis to add to the pressure and volatility that has been felt since 2020.

It would be hard to avoid operating in business survival mode, with daily reminders that the battle to keep heads above choppy financial waters continues to intensify and has resulted in:

  • A fifth of companies saying that the crisis will be worse for their business than the pandemic (BDO)
  • More than half (58%) of businesses citing supply chain issues, rising energy costs or record levels of inflation as the three biggest threats (BDO) · Registered insolvencies in June 2022 increasing by 40% compared to the same period in 2021 and 15% higher than pre-COVID levels in June 2019 (The Insolvency Service Gov.UK) · More than one in 10 UK businesses in August 2022 reported a moderate to severe risk of insolvency (ONS)
  • Annual rate of inflation reaching a 41-year high at 11.1% in October
  • Bank of England increasing interest rates to 3% in November, with further increases expected

With the clear strain that has been placed on businesses, times are tough and there has been little time to recover before the next shock hits.

Will the Economic Crisis Impact Supply Chains?

As we move into 2023, businesses are having to prepare for more disruptions at a higher pace that gives rise to even greater concern for volatility across supply chains.

Hit with soaring energy and fuel costs, rising inflation and higher transportation and shipping costs, it’s vital that businesses act so they can mitigate supply chains disruptions and respond to whatever comes next.

According to the EY Industrial Supply Chain Survey 2022, organisations are reassessing their supply chains by:

  • 77% – increasing their total number of suppliers
  • 63% – increasing the number of countries where their suppliers are located
  • 62% – making significant changes to their supplier base in the last 24 months
  • 55% – moving suppliers closer to their own operations
  • 47% – moving suppliers closer to their customers

Adapting for the Cost of Living Crisis

The words ‘change’ and ‘adapt’ now have even more significance for businesses. And while rising costs are not something that businesses are clearly immune to, there are measures that will help to create greater resilience.

  • Update cashflow forecasts – factor in things like more energy price increases, supplier price increases, corporation tax increases in April 2023 (from 19% to 25%).
  • Keep control of budgets –have complete visibility of your financials and track spending.
  • Increase prices – the British Chambers of Commerce shows that 73% of businesses have raised prices in response to rising costs.
  • Lower expenses – assess existing costs and identify areas that can be cut, or cheaper alternatives sourced.
  • Negotiate third party contracts where possible – use your existing supply network and find out if you can agree new terms for your business.
  • Access funding – if your business is viable and has good long-term growth prospects, there may be an option to raise finance.
  • Adopt technology – which can help to increase efficiency, automate operations, increase productivity and reduce costs.

As Anthony Hanley, SVP of Supply Chain Compliance at Alcumus, explains: “No quick fix will instantly resolve rising costs and the financial upheaval that businesses are facing. But there are things businesses can do to bolster their resilience and supply chain networks. Being prepared, planning and adapting in the face of ongoing disruptions and with a clear oversight of risk management is vital for businesses to weather the storm, rather than simply reacting and daily firefighting.”


To support your business, find out how our technology, people and expertise gives insight into the resilience of supply chains.

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