Business Insights And Impact On The Uk Economy: 14 July 2022

16th July 2022

The impact of challenges facing the economy and other events on UK businesses. Based on responses from the voluntary fortnightly business survey (BICS) to deliver real-time information to help assess issues affecting UK businesses and economy, including financial performance, workforce, trade, and business resilience.

Of currently trading businesses, 24% reported that their turnover decreased in June 2022 compared with May 2022; in contrast, 13% reported that their turnover had increased, while 54% of businesses reported that their turnover stayed the same.

Half (50%) of currently trading businesses reported an increase in the prices of goods or services bought in June 2022, broadly stable with May 2022; in comparison, the percentage of businesses who reported an increase in the prices of goods or services sold (20%) continued to steadily decrease, down from 24% in March 2022.

Over a quarter (26%) of currently trading businesses expect the prices of the goods or services they sell to increase in August 2022, down from 31% estimated for April 2022, with energy prices (37%) the most commonly reported reason for considering doing so.

The percentage of businesses that reported their production and/or suppliers had been affected by recent increases in energy prices in early July 2022 was 35%, broadly stable with late June 2022, and a continued steady increase since early March 2022 (25%).

More than half (60%) of businesses with fewer than 10 employees reported they had been affected by general increases in prices, compared with 77% for business with 10 or more employees; the data therefore suggest smaller businesses were less affected by price rises than larger businesses.

Among businesses not permanently stopped trading, 8% of businesses reported their stock levels of raw materials in June 2022 were lower than in May 2022, while 7% reported stock levels of finished goods were lower across the same period.

In early July 2022, 94% of businesses reported they were trading, with 86% fully trading and 8% partially trading (for example, trading with reduced hours or staff numbers). Meanwhile, 4% of businesses reported "temporarily paused trading" and 2% reported "permanently ceased trading", as their business's trading status.

Based on the responses of businesses not permanently stopped trading, the proportion of the workforce that were working as part of a hybrid model in June 2022 was 22%. The remaining proportion of the workforce were:

working from home - 8%
working from a designated workspace - 63%
on sick leave, or not working due to coronavirus (COVID-19) symptoms or self-isolation - 1%
made permanently redundant - less than 1%
other - 5%

The percentage of businesses currently trading who reported their turnover had decreased compared with the previous month was up 3 percentage points from the 20% reported for May 2022.

Approximately half of all industries currently trading reported an increase in the proportion of businesses reporting turnover had decreased in June 2022 compared with May 2022, with 31% of businesses reporting the cost of materials as having the biggest impact on their turnover in the last month. The manufacturing industry reported the largest percentage of businesses reporting this challenge, at 63%.

Other challenges that businesses reported as having an impact were:

economic uncertainty, at 28%, with the accommodation and food service activities industry reporting the highest percentage (49%)

cost of labour, at 17%, with the other service activities industry reporting the highest percentage (37%)

financial costs, at 14%, with the accommodation and food service activities industry reporting the highest percentage (31%)

In comparison, 28% of trading businesses reported they were not currently experiencing any challenges, down from 33% reported in late April 2022.

Turnover expectations
Businesses were also asked about their turnover expectations for August 2022 with 17% of businesses reporting that they expect their turnover to decrease. This is the first increase in the percentage of businesses reporting this since April 2022.

In contrast, over half of businesses (55%) reported that they expect their turnover to stay the same in August 2022, down from 59% reported for July 2022.

Approximately 22% of businesses in the wholesale and retail trade; repair of motor vehicles and motorcycles industry and approximately one in five (20%) businesses in the accommodation and food service activities industry reported that they expect their turnover to decrease in August 2022, despite the holiday period.

The data suggest some businesses are continuing to experience an increase in the prices of goods or services they buy in comparison to the previous month.

In June 2022, the percentage of businesses currently trading who reported the prices of goods or services bought had increased compared with the previous month was 50%. This percentage has remained broadly stable since March 2022.

In contrast, 20% of businesses reported an increase in the prices of goods or services sold in June 2022 compared with the previous month. This percentage has steadily decreased from the 24% reported in March 2022.

The accommodation and food service activities industry reported the largest proportion of businesses reporting an increase in prices bought, at 75%, up from 73% reported in May 2022.

The accommodation and food service activities industry also reported the largest proportion of businesses reporting an increase in prices sold, at 31%, which is broadly stable compared with May 2022.

Of currently trading businesses, 26% expect the prices of the goods or services they sell to increase in August 2022; this is down from the 30% of businesses who reported they expected prices to increase in July 2022.

Businesses with 10 or more employees also reported a fall in the percentage of businesses expecting the prices of the goods or services they sell to increase, down from 34% in July 2022 to 31% in August 2022.

At 37%, energy prices continue to be reported as the most common reason trading businesses are considering raising their prices, with the accommodation and food service activities industry continuing to report the highest percentage at 72%.

Across all industries, other factors reported included:

raw material prices (30%) - this was 38% for businesses with 10 or more employees
labour costs (23%) - this was 35% for businesses with 10 or more employees
In contrast, 34% of businesses reported they are not considering raising their prices in August 2022, with this percentage decreasing to 29% for businesses with 10 or more employees.

Impact of prices

In July 2022, 62% of businesses reported that they were affected by general increases in prices in one or more ways, broadly stable with late June 2022, however this is up 8 percentage points since this question was introduced in early March 2022.

When excluding businesses with fewer than 10 employees, the proportion of business reporting being affected by general increases in prices was 77%, with the data suggesting smaller businesses were reporting less of an impact of price rises than larger businesses.

When excluding businesses with fewer than 10 employees, the following response options remained the biggest impacts reported by businesses as a result of general increases in prices:

had to absorb costs, at 58% - with the other service activities industry and the accommodation and food service activities industry reporting the highest percentage, at 68%
had to pass on price increases to customers, at 37% - with the wholesale and retail trade; repair of motor vehicles and motorcycles industry and the manufacturing industry reporting the highest percentage, at 51%

Read the full report at - https://www.ons.gov.uk/businessindustryandtrade/business/businessservices/bulletins/businessinsightsandimpactontheukeconomy/14july2022