Growth Hub's SmartRegion report shows impact of rising prices on cost of doing business in Coventry and Warwickshire

Supply chain issues and rising costs are having a greater impact on businesses in Coventry and Warwickshire than the Covid-19 pandemic, according to a new report.

The Cost of Doing Business is the theme of the latest CWLEP Growth Hub SmartRegion report which collects information from its business engagements as well as from CWLEP, Warwickshire County Council, Coventry City Council and other organisations.

The report highlights that inflation, wages and energy costs have been added to the long list of economic challenges facing businesses.

Inflation is forecast to reach around seven per cent by spring according to the Bank of England which is impacting on the costs of raw materials, fuel and labour and, in turn, is affecting pricing and profitability if the increases are not passed on to customers.

From April 1, there has been a rise in the National Minimum and Living Wages along with National Insurance and with staff shortages across many sectors, some businesses have increased wages to attract and retain skilled staff which has added further pressure.

Energy prices have soared rapidly, and passing on the costs to consumers has further impacted business resilience and sustainability.

Roger Scott, Area Banking SME Director at Lloyds Bank, said there are a range of concerns currently affecting Coventry and Warwickshire businesses.

He said: “The main concern is energy costs especially for those companies in heavy industry and food and drink manufacturers which are reliant on heat or refrigeration in their processes.

“Wage rises versus the cost of living is really impacting the morale of workers, and the expectations on employers – especially with home energy bills now rising to the levels some people pay for their rent or small mortgages.

“You also have to factor in that several core commodities are sourced from Russia or Ukraine which are leading to price increases and availability issues.

“Steel prices are volatile, and their costs are exponentially rising while shed manufacturers are seeing increases in wood prices and reduced availability. There are other supply origins for timber, but Russian timber has historically been a main source.

“Grain prices are also on the rise with around 30 per cent of the world’s grain supplies coming from Russia or Ukraine. Co-operative merchants are seeking a 30 per cent increase in financing lines linked to core grain price increases and the needs of working capital which highlights how this will flow through to food manufacturers and then to consumers later in the year.

“Automotive manufacturers are continuing to struggle through global semi-conductor shortages, and businesses are spending much more time managing day-to-day operations particularly dealing with the increased costs in their supply chains.

“In many ways, the numerous supply chain and costs issues are having a greater impact than the Covid-19 pandemic.”

Craig Humphrey, Managing Director of the CWLEP Growth Hub, said business support in Coventry and Warwickshire was more important than ever.

He said: “Business support organisations are continuing to focus on minimising the negative economic impacts from the pandemic, the EU exit and energy costs to help the economy’s continued recovery as well as minimise the growing number of costs of doing business.

“At the Growth Hub, we will be continuing to assist businesses in Coventry and Warwickshire to rebuild, overcome barriers to growth, promote innovation and improve business resilience for the future and, just as importantly, boost customer confidence.”