Business Matters: Helping SMEs Navigate Today’s Economic Environment | Blogs

Gus Williams, COO of Bevan Buckland LLP, offers his advice to help SMEs navigate today’s business environment.

Many small and medium-sized business owners will feel beleaguered from all sides at this time, dealing with the worrying combination of staffing issues, rising inflation, rising interest rates, growing recession forecasts and decline in demand.

While media coverage is full of negative indicators for business, it’s important for small business owners to understand and, more importantly, plan ahead to successfully manage these issues. Gus Williams, CEO of Bevan Buckland LLP, identifies key issues facing businesses,


Core inflation was rising long before Russia invaded Ukraine, as demand returned post-Covid. The world has experienced 20 years of low inflation due to the transitory effects of globalization. This trend of low energy costs, cheap global transportation and a shift to low-wage manufacturing is now over. Add to that the loose monetary policy of the past 10 years and increased government spending during Covid, and core inflation was already likely to reach 6-7% were it not for the energy and food shocks triggered by the war in Ukraine.

Energy and food price shocks then fueled this inflation even higher. Good harvests and a stabilization in natural gas prices could lower inflation in the near term, but even if that happens, core inflation should remain well above the Bank’s 2% target. from England.

Interest rate

Over the past six months, the consensus view on when UK interest rates will peak has steadily increased. Initial estimates called for rates to peak at 1.75%, with the latest inflation figures markets now pricing in a peak of 3.75% next year. Traditional monetary theory implies that rates should match or exceed the rate of underlying inflation to have a sufficient impact on lowering inflation. If core inflation excluding one-off shocks remains at around 6%, then even the current expectation for rates peaking at 3.75% could be rather low. Companies should expect long-term rates to normalize to around 3-4%.

The work market

Covid has accelerated demographic trends that will see increasing numbers of experienced staff leaving the workforce as the baby boomer generation retires. Employers find it difficult to hire experienced staff because there are not enough experienced staff to replace those leaving the labor market. Among the young, potential employees in their 20s and 30s have a skills gap compared to previous generations, and among new entrants to the labor market, competition among employers is fierce. All of this drives up wages and, in many cases, prevents companies from finding staff to hire.

Recession risk

All of the above is likely to lead to a decrease in overall economic activity. The main reasons we see growing predictions of a recession are falling consumer confidence as incomes are squeezed, but also a growing recognition that to get inflation under control, the only historically effective solution is that the Bank of England raises interest rates to a level where aggregate demand falls enough to ease price and wage pressures.

Understand your cash flow and balance sheet

The starting point for any business owner should be understanding your cash flow and balance sheet, and testing future scenarios to understand the impact of rising costs, rising interest rates and decline in demand. A good accountant can help you plan ahead and ensure that your business will not just survive, but potentially succeed in any tough economic environment.

How can we help?

As the largest independent accountancy firm in Wales with over 120 years of experience supporting SMEs, our highly qualified team are fully equipped to deliver the full range of accountancy services, to the highest standard.

From essential functions such as accounting and tax returns to practical advice on how to grow your business, everything we do is based on deep knowledge and a commitment to doing the best for our clients.

If you would like to discuss how the team at Bevan Buckland LLP can help you grow your business, please contact us by calling us on 01792 410100 or email [email protected]