Over three quarters of UK businesses expect performance to be the same or bette over the next year, according to our new research. This compares with only 21% who predict a slower recovery.
The results are based on our Decision Maker Panel – surveys of chief financial officers in UK companies across the full range of sectors and regions.
Resilient SMEs
Many SMEs struggle to adopt long-term strategic resilience when urgent operational issues and customer demands call for their attention. The result is that SMEs are often reactive, and short-term firefighting can easily overshadow long-term planning activities.
This is why investing in management control tools such as economic and financial budgets, contingency plans and ERP systems are a must. They can improve the reactivity of companies and make them more resilient to unforeseen events.
Other key factors for building a resilient SME include a perennial ethos, values and position in the innovation ecosystem, as well as strategic selectivity. This capability allows SMEs to redirect their limited resources toward the most valuable areas of their business model. It also helps SMEs to create a buffer of funds, allowing them to weather unfavorable financial circumstances and economic shocks. Finally, a family-friendly environment and the presence of women directors on the BoD are also beneficial.
Uncertainty around the economy
Uncertainty can affect business decisions and slow down economic recovery. One of the key channels through which this happens is ‘option value’, whereby businesses hold off making an investment until the future path of the economy becomes clearer. This might also delay relocating resources from a less productive to a more productive use.
The uncertainty data used here come from the Decision Maker Panel survey – a large, monthly sample of firms conducted by the Bank of England and the universities of Nottingham and Stanford. For example, Baker et al (2020) create a weekly index by scraping Twitter for mentions of the words “economic” and “uncertainty”, then measuring how frequently these terms appear. They find that this series behaves similarly to the newspaper-based US uncertainty measure.
Inflation
During periods of high inflation it’s vital to understand how this can impact your business. High prices are not only a problem for people that don’t have enough savings or income to keep up with rising costs, but it can also lead to a reversal of the upward trend and cause deflation, which is bad for everyone.
The Government sets a target for how much overall prices should increase each year and it’s the Bank of England’s job to manage this. A small amount of inflation is actually a net positive because it increases wages and encourages investment.
New ways of working
New ways of working are a wide-ranging term that encompasses many different work environments and practices. These may include remote working, flexible hours, and co-working spaces. They can also refer to results-only measurement systems and high levels of autonomy for employees.
The concept of new ways of working is still relatively new for most businesses. Many people are unsure how to implement them effectively. It’s important to keep an open mind and be willing to try out these new work methods. It’s important to remember that these changes aren’t necessarily permanent.
They think that people who aren’t at the office aren’t as committed to their job needs read more hear.
