A shift in customer spending is one of the biggest challenges facing North West businesses over the next six months, as the cost of living crisis continues to bite.
According to BDO LLP’s bi-monthly Economic Engine survey of 500 mid-market businesses, more than half of regional companies (63%) said a decision by customers to cut back on spending is their biggest concern, alongside rising interest rates and the cost of borrowing (40%).
However, for 43% of businesses in the North West, difficulty accessing capital, such as bank loans and equity investment, continues to pose a significant challenge. This comes after the House of Commons Treasury Committee published a report on the venture capital industry, highlighting an ‘unacceptable failure’ to invest in regional businesses.
The survey by the accountancy and business advisory firm found that as purse strings tighten, businesses are having to explore ways to save money in the coming months. Nearly half of North West businesses (47%) are reducing their energy usage as a way of cutting overheads, tapping into Government support schemes, such as the Energy Bills Discount Scheme and the Industrial Energy Transformation Fund, to ease the pressure. Changing customer spending habits are also impacting employees, with a third of regional businesses (33%) admitting that they intend to hold off raising salaries and awarding bonuses in order to balance the books.
Angela Cross, partner and Head of BDO in the North West, commented:
“Customer spending habits have always dictated how many regional businesses approach day-to-day operations and longer term growth. As the battle with inflation continues to impact all facets of the regional economy, North West companies are having to be laser focused on business priorities for the remainder of 2023, with debt financing and restructuring workforces at the top of the list for more than a quarter of businesses (27%).
“What is reassuring to see is, despite the continued pressures facing businesses, growth ambitions remain firmly on the agenda, with 23% of North West companies considering the option of overseas expansion, whether that’s opening new facilities, or exploring new export channels, as a way of bolstering revenue streams.”
However, according to BDO’s Economic Engine survey, North West businesses still believe the Government has a significant part to play in helping the regional economy to weather the ongoing storm.
Cross added: “Despite a fall in wholesale energy prices, many North West businesses are still feeling the pinch when it comes to energy bills, with nearly half (47%) calling for more support and cheaper contracts for mid-sized businesses.
“Central to future success in the region is the ability for businesses to remain ambitious, focused on growth, and hungry for innovation. Unsurprisingly, 40% of North West businesses want the Government to offer more financial support to help them meet those specific aims. Without more generous funding packages, replacing the likes of Horizon Europe, then regional businesses will continue to struggle in the face of ongoing pressures.”
