Inflationary pressure poses huge risk to Scottish businesses
Inflationary pressure poses a huge risk to Scottish businesses in the coming months, with a significant number unprepared for the highest level of inflation in 30 years, according to accountancy and business advisory firm, BDO LLP.
According to the firm, 73% of businesses have only accounted for a 3-5% level of inflation this year – already well below the current 6.2% rate, which is the highest it’s been since the 1990s.
The Office of Budget Responsibility (OBR) has suggested that the fallout from the war in Ukraine could push inflation to a 40-year high of 8.7% in the final three months of 2022, with The Bank of England also warning that inflation could hit double digits. BDO’s Rethinking the Economy survey has revealed that nearly half of Scottish companies are planning to seek additional finance in order to counteract rising inflation.
The Rethinking the Economy survey showed that one of the greatest challenges facing businesses over the next six months is domestic supply chain disruption (30%), with the rising cost of living (29%), whether that’s higher business costs, or reduced revenues as a result of customers cutting spending, also posing a significant problem.
However, companies in Scotland are responding positively to the crisis, with a quarter of businesses choosing to increase the wages of employees in an effort to tackle the cost of living.
That level of optimism is also reflected in the amount of time it will take Scottish businesses to return to pre-pandemic revenues, with 73% stating that they expect earnings to recover within this calendar year – the highest rate anywhere across the UK.
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