SMEs need greater government transparency to survive supply chain issues
Supply chain issues are causing big problems for the majority of UK businesses. It is clear that small and medium sized enterprises are being disproportionately hit. SMEs account for around half of the UK’s private sector turnover which is estimated to be 2.3 trillion according to the FSB. In March 2021, a year after the onset of the covid pandemic, the government issued Build Back Better, a plan for growth. So how has the world's fifth biggest economy fared in the last year and have we built back better?
The answer in many cases is no. The Ukraine - Russia war has had a profound effect on the UK’s recovery undoubtedly, but the supply chain issues were there long before the invasion. My SME clients tell me that they are struggling with supply chain issues and these issues could send them out of business.
SMEs (small and medium-sized enterprises) account for 99.9% of the business population (5.9 million businesses). At the start of 2019: there were estimated to be 5.9 million UK private sector businesses. 1.4 million of these had employees and 4.5 million had no employees. SMEs are the lifeblood of our economy. If they hit hard times, we all do. Government figures tell us that compared with 2020, the private sector business population has decreased by 6.5% (389,600 businesses).
Headlines such as ‘UK borrowing halves as economy rebounds from lockdowns’ could be construed as misleading. In terms of transparency, SMEs are not rebounding from the lockdowns and supply chain issues are a major factor in that. UK lockdowns may be over, for now but China’s lockdowns are still periodically happening. This is putting the roughly 400 thousand factories, some of which manufacture components and tech, way behind on orders. This is causing cash flow problems for businesses here in the UK. I have a client who has had a record month in terms of orders, but one of the world's biggest telecommunications companies cannot ship his order from China for at least 4 months. They say there is a backlog on orders. My client now has a cash flow issue because he is required to pay for the order and still has to pay his staff but cannot take payment from customers until later. Supply chain issues are affecting every single industry in the UK. They are creating big price hikes which in turn is having a serious impact on the cost of living crisis.
An economic recovery is the phase of the business cycle following a recession. The figures tell us we are no longer in a recession. However, the stark reality on the ground is that we very much are still in a recession and fears of a double dip are real. So what can you do as an SME to survive this? It is important that we are truthful about the recovery. If we peddle the government rhetoric to our clients, the public and general consumers then it allows them to expect pre pandemic levels of service. Currently, that simply can’t be achieved by most SMEs here in the UK and around the world who rely on the global supply chain. It is important consumers understand that and lower their expectations and as business owners communicating this to them is paramount. In over 30 years of consulting I am coaching my clients through these challenging times.
Small and medium sized business owners need to adjust their expectations on what can be achieved and then manage their customers and clients expectations. Be honest about supply chain issues and communicate this information to customers. The fear is that consumers will look elsewhere for their goods or services. This is a global problem and it is unlikely they’ll get what they want more quickly from someone else without paying a much higher price. Communicate this to your customer base. Keep them up to date with what is happening with regards to global supply issues. Nurturing business to consumer relationships is incredibly important in times of economic instability. Create a sense of trust and loyalty with your clients or consumers. Find them alternatives if you can. Keep building truth in your brand. You can not change the global supply chain issues that you are faced with but you can work on other areas of your business in the meantime. Whilst pivoting or diversifying is not always the right move, it may be that you can add another arm to your business which doesn’t rely so heavily on the global supply chain.
The global economy will recover, it is cyclical. However, it will not be as quick as economic leaders are bullishly predicting. If you plan taking your business forward with that in mind you will have a fighting chance of survival.
