Risk and reward are two closely intertwined factors for start-ups and smaller businesses and their success.
But what happens when recent inflation ups the risk factor, and what business decisions will you need to make to cope?
According to a small and medium-sized enterprise (SMEs) insights report, 54 per cent of smaller businesses in the UK face collapse because of increasing fuel and energy prices (Simply Business). Surging living costs are presenting many companies with new challenges. Norfolk-based enterprises who often do business abroad will have to factor in the price hike to weather the coming storm.
The government has announced tax cuts and schemes to help businesses stay afloat, however, it's tough to keep up with the legislation changes.
Below, international payments specialist, Clear Currency, tells us more about what support is available, and emerging trends that may affect your business’ finances and future transactions.
Inflation concerns
One of the most critical issues facing companies, families and individuals across the country is heightening inflation. The current inflation rate in the UK is 9.9 per cent, with the Bank of England estimating that this could peak at 11 per cent and remain above 10 per cent for a few months before rates begin to drop (Bank of England).
This year has seen some of the highest inflation readings since 1982, which poses a challenge to smaller businesses trying to regulate costs (tradingeconomics.com).
Norfolk is home to a dynamic manufacturing sector featuring an array of companies, from automotive to pharmaceuticals and composite materials. The sector spreads throughout Norfolk and Suffolk, and employs a workforce of 84,500 employees and 6,000 enterprises, trading domestically and abroad (newanglia.co.uk). However, the devaluation of the pound amid soaring inflation and interest rates has added an enormous cost base for these businesses.
Before economic stability returns, along with the confidence of investors, firms conducting overseas transactions should attempt to minimise costs and mitigate risk.
When signing up for an account with Clear Currency, you’ll have access to a dedicated account manager who can offer guidance about the current market and geoeconomic events that could affect your overseas payments and bottom line.
Increasing energy and fuel prices
Nord Stream 1, an essential pipeline in which Russian gas flows to the countries of Europe, has closed indefinitely due to leaks. Last year, EU countries imported 40 per cent of their gas from Russia through the Nord Stream, and the conflict in Ukraine has contributed to the ongoing energy crisis facing the UK (bbc.co.uk).
The government has confirmed the Energy Bill Relief Scheme will remain in place until April 2023 to assist businesses with rising bill costs. However, a review will be launched to assess what long-term support will be offered after this period (thecaterer.com).
Many small and medium-sized businesses have already been significantly impacted by increasing energy costs and could end up paying more than the proposed cap (energysavingtrust.co.uk).
In such a volatile environment, SMEs that trade overseas or make international payments should look to protect themselves and work alongside specialists that can help them make informed business decisions.
Clear Currency can guide you on effective FX tools to use when making or receiving payments overseas. This could be vital to helping your business to remain profitable and to mitigate currency exposure risk.
Cost of living crisis
As monthly bills swell to unprecedented levels, lots of people will begin tightening their belts this winter. Wages have not kept up with the rising prices, as the average regular pay growth fell by 2.8 per cent in September (bbc.co.uk).
As budgets grow smaller and more items and services become luxuries, cutting back on retail spending will drive down profits for a host of smaller businesses. It may well prove fatal for short-lived enterprises, as almost 2,000 businesses went bust in England and Wales in August – an increase of 43 per cent on the previous year (metro.co.uk). Finding additional sources of revenue may be a lifeline for SMEs who can find a suitable market internationally.
Seeking currency guidance and devising an effective FX strategy will be essential for helping businesses to make the most of the opportunities joining the global market can offer. With Clear Currency's secure online platform you can access live exchange rates and make international transactions in minutes.
Potential tax cuts
A talking point of the past few months has been the mini-budget proposed by Kwasi Kwarteng, the now ex-chancellor. The aim of the mini-budget was to help reassure businesses in the face of rising inflation. However, newly appointed Chancellor of the Exchequer Jeremy Hunt has announced a U-turn on some of the planned measures and tax cuts (BusinessLive).
This includes scrapping a proposed freeze on alcohol duty rates and a VAT-free shopping scheme (thecaterer.com). Basic rate income tax will also no longer be reduced in April 2023 and a rise in corporation tax from 19 to 25 per cent will go ahead. Two policies of the mini-budget to remain, however, are that cuts to stamp duty and national insurance will still be made (Simply Business).
These reviews have left businesses uncertain if they can rely on tax cuts as a supportive measure this winter. A full budget is due to be announced by Jeremy Hunt on October 31, 2022 (The Guardian).
These amends could mean researching ways to mitigate foreign currency risk could be more crucial than ever. This is where the guidance offered by international payment providers, such as Clear Currency, could help businesses to avoid costly pitfalls when making foreign payments.
How Clear Currency can help companies navigate the energy crisis
For business owners based in Norfolk and across the country, the uncertain economic situation poses a serious challenge. SMEs, whether they are in their infancy or have an established place within the market, may be forced to take steps to ensure their survival. Price increases are an unfortunate necessity in an inflationary environment, but businesses will be rightly concerned about damaging customer relationships in the long term.
Firms that trade internationally, or who are looking to expand their horizons, will need to mitigate the risks and maximise the profits that come with operating abroad. Clear Currency’s experts can help you save precious time and resources on your international payments, provide one-to-one support and offer competitive exchange rates for 35 currencies across 130 countries.
They may be able to help you find the answers you are looking for during this time of extreme economic turbulence.
Clear Currency is FCA regulated and has a 5* Trustpilot rating.
Protect your business from currency risk and sign up for a free account at clearcurrency.co.uk today.
Comments: Our rules
We want our comments to be a lively and valuable part of our community - a place where readers can debate and engage with the most important local issues. The ability to comment on our stories is a privilege, not a right, however, and that privilege may be withdrawn if it is abused or misused.
Please report any comments that break our rules.
Read the rules here