Colin Borland: Small firms start the new year under familiar cost pressures

If this is your first day back in the office (or, more likely, back in your makeshift home office), or in your shop, or out on the road, or wherever it is that you do business, then welcome back and Happy New Year!

Or, if you were one of those who just worked through the holidays, keeping the nation fed, safe and (as far as was possible) entertained, then thank you. I hope you get a decent, well-earned break before long.

One group of people who certainly didn’t have much time off were the small business owners whose operations have been impacted by the latest round of coronavirus restrictions.

Retailers, publicans and restaurateurs will have been studying the new rules around keeping everyone a metre apart and dusting down their old floorplans.

Others, including those in the wider supply chain whose markets have effectively (literally, in some cases) dried up, will be trying to get their heads round the new grants that will be coming to offset some of their losses and hopefully keep them afloat.

When all of these immediate problems are swirling around, it can be hard to do the traditional new year look towards what the next twelve months might hold.

And, while there are precious few certainties in business at the best of times, the landscape now ahead is particularly unclear.

But, based on what we already know, is there anything we actually can predict?

Well, at the risk of stating the obvious, we already know 2022 is getting off to a difficult start. Omicron restrictions aside, businesses are facing spiralling overheads, staff shortages, shaky consumer confidence and tax rises in the spring.

What will be interesting is the steps businesses take to deal with all this.

Unless we see the volume of business being conducted increase, these pressures will continue to tighten, or completely remove, margins.

So, one option, however unpalatable, might be that firms are forced to increase prices, putting further upward pressure on inflation.

Businesses may also look to address overheads, and indeed staffing issues, by relying more on technology. 2020 and 2021 saw big strides taken in automation and taking businesses online. The popularity of government initiatives like DigitalBoost shows that there’s huge appetite among the business community to press on with this work.

I also think, if we make the right financial products and incentives available, we could see a comparable level of small business investment in green technology – making their operations more efficient and their energy bills slightly less crippling.

Something else that we know is definitely happening this year is the local council elections in May. Often wrongly overlooked in discussions about the economy, good local government is vital to local economies and communities.

Thus, it’s important that the administrations which take or retain the reins after the votes are cast have local economic development at their hearts.

One very powerful tool they could use to drive that agenda is their not insignificant spending power. Used wisely and targeted towards backing local firms where possible, it can create a virtuous circle of spend that supports local businesses, local jobs and supply chains.

Reviewing their licensing and regulation policies to ensure they’re playing an active role in reinvigorating the local economy would similarly pay dividends.

We don’t know what the next twist in the horrible covid story is going to be. We can only hope that 2022 is the last chapter and, not only that we make it to the end, but we’re ready to take full advantage of the re-opening economy when we get there.

Colin Borland is director of devolved nations at the Federation of Small Businesses.

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