As businesses continue to operate in an increasingly challenging environment and brace for the impact of rising cost and wage inflation and energy bills, the latest research from Grant Thornton’s Business Outlook Tracker* finds that the Yorkshire mid-market are soaking up the increased costs.
The survey of 50 Yorkshire mid-sized businesses in early April finds that over three quarters (82%) have not yet increased their prices to cover the impact of rising inflation. Of this portion, almost a third (32%) state they do not expect to this year.
Of the 24 Yorkshire businesses that have, or are considering, increasing prices to cover inflation, three quarters (75%) expect it to remain in place for at least 12 months if necessary. Less than a tenth (8%) expect it to remain in place permanently, showing that, if implemented, it is only viewed as a short-term solution.
Confidence in the UK economy plummets
The research finds that rising costs and the challenging operating environment has also impacted the Yorkshire mid-market’s confidence in the UK economy. Only 62% of respondents are optimistic about the outlook of the UK economy, a -3 percentage point (pp) decrease compared to February (65%).
On the other side of the coin, the Yorkshire mid-market has gained optimism in their company’s funding position. The Tracker recorded a significant spike, rising +31pp compared to February – up to 92% of respondents.
Similarly, profit growth expectations have received a boost, with over one third (44%) expecting their profits to increase over the next six months. A +9pp increase compared to February.
Rising costs have not stalled future investment plans
Rising costs have not affected the confidence of the region, as Yorkshire’s mid-market investment expectations for the next six months have actually increased significantly across all areas monitored by the Tracker.
The most significant increase is seen in plant, machinery and new buildings (+18pp compared to the last Tracker). This is followed by R&D (15pp), recruitment (+14pp) and growing in international markets (+11pp).
Andy Wood, managing partner for Grant Thornton UK LLP in Yorkshire, said:
“Yorkshire businesses are continuing to face a perfect storm of issues with rising costs from all sides putting pressure on many to increase prices as they focus on maintaining profitability and cashflow levels, however most of the Yorkshire mid-market has managed to avoid raising costs for consumers so far. With inflation hitting a 30-year high, many businesses face a double squeeze, with almost every cost increasing alongside rising concern from the potential of slowing consumer demand.
“It’s important for businesses to act quickly and decisively to ensure that rising inflation does not impact them too severely. Business leaders need to look at every aspect of their business, particularly their operational efficiency and supply chain resilience, to identify any areas of potential saving.”