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Increasing Costs ‘Eclipsing Brexit and the Pandemic’ as Risks for UK Businesses



Challenges relating to Brexit and the pandemic are now being eclipsed by concerns about rising costs among UK companies, according to recent polling of business leaders.

In recent years, the issues of Brexit and the pandemic have dominated among the risks for the near term future among big companies but worries about inflation are now much higher on the agenda for chief financial officers (CFOs).

Indeed, a record proportion CFOs are currently expecting significant increases to their operating costs within the next 12 months, according to figures collected by Deloitte.

Meanwhile, more than a quarter of CFOs have already experienced significant or severe levels of disruption within their supply chains, and those challenges are expected to remain widespread for some time.

Issues associated with geopolitical risks have risen sharply up the agendas of CFOs in recent months since the Russian invasion of the Ukraine, which has led to widespread uncertainty for companies across industries.

In addition to causing direct cost-related concerns, rising inflation is also expected to prompt interest rate increases from central banks and, therefore, higher costs of borrowing for businesses.

Ian Stewart, Deloitte’s chief economist, has said: “Rising geopolitical risk in the wake of the invasion of Ukraine and alongside high inflation mean that the external challenges faced by business are greater today than at any time in the last eight years.

“These risks now far eclipse Brexit and the pandemic, which have dominated the list of CFO concerns in recent years. Over the next year, CFOs believe a mix of rising costs and slower growth are set to squeeze margins.”

According to Deloitte, despite all the issues and the cost-related challenges seemingly in the offing, CFOs are generally sticking to their plans of pursuing growth and remaining focussed primarily on capital spending.

Richard Houston, a senor partner and CEO at Deloitte, said: “It’s clear that businesses are operating in an increasingly uncertain and challenging economic and geopolitical environment.

“However, CFOs are not reporting a widescale shift to defensive strategies, such as cost cutting, seen at the beginning of the pandemic.

“Introducing new products, services or entering new markets remain the top balance sheet priorities. This continued focus on investment will be vital for resilience moving forward.”

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