MarketFinance: SMEs are withstanding rising supplier costs
MarketFinance research has found that the majority of small- and medium-sized enterprises (SMEs) are continuing to trade without increasing their prices, despite rising supplier costs.
The alternative business lender’s survey of 1,000 SME owners has revealed that 79 per cent have faced increased prices from suppliers over the past six months.
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An increase in cost of raw materials was the top ranked reason given for price increases by suppliers, most keenly felt by businesses in the North West of England (85 per cent), followed by staff shortages. Across the UK, a quarter of SMEs have seen supplier prices almost double over the past six months.
However, nearly a third of SMEs (32 per cent) have been able to absorb the increased costs without passing them on to customers, suggesting that these businesses have the necessary cash reserves to handle the impact.
Only a fifth (21 per cent) are passing a portion of the increased costs onto customers. Businesses in the South West of England and Northern Ireland are least likely to absorb the costs while businesses in the North West and Yorkshire are the most likely to do so.
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Customers of these companies seem to understand the situation with only 20 per cent challenging the SME owners about the price rises.
Two-fifths said they could increase their prices by up to 10 per cent in the run up to Christmas while 73 per cent of SMEs are already preparing for the current higher prices to be the norm until at least the end of 2022.
34 per cent have taken out loans or are using other finance facilities to manage the increased cost of doing business.
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“The current economic environment with rising costs is presenting some headwinds and headaches for SME owners but they are proving to be as resilient as ever,” said Anil Stocker, chief executive at MarketFinance.
“The vast majority have been thinking ahead and accounted for the longer term scenario, which will hold them in good stead to do business.
“It’s great to see that SME owners are taking the long view and preserving their customer relationships and managing suppliers by having a finance facility in place to deal with the overhead for now.
“The British Business Bank announced last week that it will extend its recovery loan scheme to June 2022.
“This extension will give SMEs easier access to more affordable finance they need to continue running and growing operations in the face of ongoing challenges such as staff shortages and supplier price increases.”