Manx Financial: Rising inflation means "difficult year for SMEs"

The data also showed the largest upward contributions to the December 2021 CPIH 12-month inflation rate came from housing and household services (1.31 percentage points) and transport (1.29 percentage points).

Manx Financial: Rising inflation means "difficult year for SMEs"

The Consumer Prices Index including owner-occupiers’ housing costs (CPIH) rose by 4.8% in the 12 months to December 2021, up from 4.6% in the 12 months to November, according to Office for National Statistics (ONS).

 

The largest upward contributions to the December 2021 CPIH 12-month inflation rate came from housing and household services (1.31 percentage points) and transport (1.29 percentage points).

On a monthly basis, CPIH increased by 0.5% in December 2021, compared with a rise of 0.2% in December 2020.

The largest upward contributions to the change in the CPIH 12-month inflation rate between November and December 2021 came from food and non-alcoholic beverages, restaurants and hotels, furniture and household goods, and clothing and footwear.

These were partially offset by large downward contributions to change from transport, and recreation and culture.

The Consumer Prices Index (CPI) rose by 5.4% in the 12 months to December 2021, up from 5.1% in November and on a monthly basis, CPI increased by 0.5% in December 2021, compared with a rise of 0.3% in December 2020.

Ed Rimmer, chief executive of Time Finance, said: "Rising inflation is hugely concerning for business owners and presents another formidable obstacle for them to overcome following two years of reduced operations due to COVID, staff shortages and supply chain issues.

"Throw Brexit into the mix and this really does become a vicious cycle for many. Materials shortages and rising costs can mean reduced business levels, which impacts income and provides less headroom for growth and recovery.

"The SMEs we serve are incredibly resilient and the classic British “keep calm and carry on” attitude is fortunately prevailing, for now at least."

Douglas Grant, group chief executive at Manx Financial Group PLC, added: “Today’s UK inflation figures continue to indicate that 2022 is set to be a difficult year for SMEs.

"The rising costs of goods and utilities, coupled with a tightening of the labour market, subsequent wage inflation and supply chain issues will result in unprecedented demand for working capital and SMEs will need to ensure they have sufficient liquidity provisions to operate in this inflationary environment.

"Rising inflation will force businesses to scrutinise their internal pricing models and decipher whether they can sustain margins with higher input prices or choose to pass down the cost to consumers.

"SMEs will also need to be able to distinguish between temporary and permanent inflation, with some areas impacted by inflation such as labour costs being potentially irreversible.

"With a potential interest rate hike just around the corner and the UK SME debt burden ballooning to record levels, exasperated by the zombie status of weak businesses that continue to service their debt piles with many falling off a loan default cliff, it is important to address how this debt is ever going to be paid back and whether it is in the interest of the UK economy to continue to support all SMEs.

"We believe that it is imperative that this cycle is not compounded further in 2022 and that instead we focus on supporting sectors and businesses that are resilient and nimble enough to adapt and therefore continue contributing to the economy’s growth.

"At Manx we have done all we can to support those viable businesses throughout the pandemic and will continue to work alongside the government and traditional lenders, to deliver upon all of our objectives.”

Rob Peters, director of Simple Fast Mortgage: "The diabolical double act of the pandemic and Brexit have served up a stagnant economy and soaring inflation.

"Put simply, the cost of making, or buying, anything is rising fast, and people are not earning any additional money to pay the increasing cost. It's a complex problem, and all the potential solutions are painful."

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