Two separate reports published by PwC and Zoho, have warned of a difficult 2024 for business owners. The recent studies suggest that corporate insolvencies will continue to grow, with inflation being a major concern for UK directors.
Zoho’s Digital Health Study showed that two in five UK business owners cited inflation as their main concern going into 2024. Despite its recent slowing, inflation still sits at 4.6%, more than double the government’s stated 2% target. An even higher number (45%) of those surveyed were worried about the economic outlook for the UK overall.
Meanwhile, PwC’s economic outlook for 2024 also paints a stark picture for SMEs, with the financial giant predicting that the number of corporate insolvencies will reach a 20-year high in 2024. Vindicating the concerns of those surveyed in Zoho’s study, PwC’s report expects to see almost 30,000 businesses fold in 2024.
The report explains that of the 30,000 they quote, the vast majority will be comprised of small businesses. They list the industries most at risk as manufacturing, hospitality, and transport/storage.
Hospitality hit hard
As we’ve already seen, the hospitality sector has been under particular pressure for some time now, with operating costs only adding to the woes brought upon by reduced footfall. Recent high-profile restaurant closures have only highlighted the sector’s struggles, with Sunday Brunch’s Simon Rimmer, and Masterchef finalist, Tony Rodd both having to close their venues due to economic struggles.
PwC’s take on consumer spending perhaps portends a reason for reduced hospitality spending. They expect consumer prices to remain high, sitting at almost 25% higher than early 2021. This, they say, will see the public “continue to readjust their spending based on their priorities”.
Rick Smith, Managing Director of Forbes Burton, agrees that this is one of the main drivers of struggles in the hospitality industry, he explains that “traveling and eating out will always be low on the list of priorities for struggling families. This is on top of high interest rates, higher supplier costs, spiralling rent payments, and an upcoming increase in the National Living Wage for staff. All of these factors together are creating a perfect storm for insolvencies that’s looming upon the whole sector”.
A silver lining?
Thankfully, it’s not all bad news in PwC’s report. They also expect that inflation will eventually fall back to a figure closer to the 2% target if global energy prices are allowed to drop. Obviously, this depends on the volatile situation in other countries, and can’t necessarily be counted upon. Barret Kupelian, PwC’s Chief Economist, described such volatility as “known unknowns” among their predictions, that have the potential to “change the trajectory of the UK”.
There’s also scope for improved finances for low-income families in PwC’s findings. They foresee an improvement in living standards for those eligible, spearheaded by an increase in the National Living Wage and a housing benefit increase. This could potentially see an uptick in sales for companies that count on this demographic for a majority of their business.
Kupelian suggests that “2024 will be the year the UK turns a page”, and despite the concerns surrounding inflation, Zoho’s study shows that many directors are still open to investing in their companies’ futures. 67% of those surveyed mentioned that they’re either already using AI processes or planning to invest heavily in it soon.
The survey also explains that many of its respondents still planned to invest in customer experience, employee experience and data privacy. Managing Director of Zoho UK, Sachin Agrawal, thinks that this is a wise move for companies “looking to future proof their businesses against the economic permacrisis which continues to create turbulence”.
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