SME priorities for 2022
As 2022 begins, it’s fair to say that many SMEs had hoped the economic weather would be less turbulent than in early 2021. However, with Covid-19 still around and putting pressure on demand, many businesses might be looking at the next 12 months with some degree of pessimism.
Yet, there is cause for optimism. The Omicron variant looks less serious than previous forms, and the UK looks to be emerging sooner than many other countries from the pandemic thanks to higher levels of immunity
Isha Patel, Head of Direct Commercial at Hiscox, says that it is essential for business-owners to reflect on the challenges of the last year, while looking ahead to the opportunities of 2022. “A new year is a time of reflection on the prior year and giving clarity on the forthcoming one,” she says. “Take some time to be clear on exactly what your business aims to achieve this year. It doesn’t have to be a rigid plan that you force yourself to stick to but having a guiding light throughout the year is of huge benefit for businesses of any size.”
When looking ahead to 2022, there are five important things to consider.
- Last year showed you should expect the unexpected. 2021 began with Britain leaving the EU at the end of January, amidst a Covid-19 lockdown that lasted for much of the first half of the year. Yet the largely successful vaccine rollout enabled the country to emerge in July and many small and medium-sized businesses (SMEs) enjoyed a summer of something resembling normality.Many expected the pandemic to be over once the economy opened fully last summer, yet new variants, rising inflation, and supply chain issues dampened demand and proved a drag on business by the end of the year.Research by the Bank of England showed that a rising number of SMEs fell behind on their loan repayments in the three months to November. This suggests that the withdrawal of government support, such as the furlough scheme, in July caused many smaller businesses to struggle. Indeed, research by Merchant Savvy shows that 24,960 more businesses closed than opened during Q2 and Q3 2021.While 2021 was a year of survival for many, 2022 should be one where businesses look to grow and ready themselves for the economy opening up. It appears that many SMEs are feeling more confident going into 2022, with 53.8% of nearly 9,000 firms surveyed in November by Merchant Savvy saying they have high confidence that they will survive into Q2 2022, significantly up on the 37.4% of business that felt the same in January 2021.
- The challenges will change. According to the Hiscox Business Demystified Survey 2021, many businesses expected generating revenue to be their chief struggle last year, followed by employee mental health and wellbeing, customer retention, risk of closure, and staff retention. In fact, average revenues for UK SMEs in 2021 grew by 9.5%, according to Merchant Savvy.But 2022 will likely see other challenges take centre stage.
- Employee wellbeing is key. The pandemic undoubtedly took its toll on staff, with many struggling to cope with the isolation of homeworking and the blurring of lines between their work and personal lives. According to research by the Centre for Mental Health, up to 10 million people in England alone will require mental health support as a consequence of the pandemic.Good businesses will ensure that their staff are supported and teams are sympathetic to the challenges everyone has faced. In fact, it appears many already are. Research by Bupa shows that nearly 30% of UK business leaders are placing employee mental health at the top of their agendas in 2022.Perhaps the biggest challenge in the coming year will be staff retention. Across the world, many businesses have struggled to hold onto staff. Research by the Chartered Management Institute for Bloomberg News shows that 2021 saw rising numbers of voluntary staff departures in UK businesses, with expectations on salary and working environment changing in response to the pandemic.SMEs will need to respond in 2022 by offering attractive work packages to secure, and retain, the best talent. Flexible working looks here to stay, while salaries may need to rise to meet surging inflation.
- Ensure your firms are resilient. At the same time, the Omicron variant has caused many workers unable to do their jobs. Indeed at the start of the year, the government warned of a “worst case scenario” where 25% of staff were off work.The impact of this is also being felt across the world, with staff shortages and disruption to businesses severely hampering supply chains. With businesses struggling to operate at full capacity, and therefore meet demand, prices are likely to continue spiralling upwards. Inflation already hit 7% in the US in December, and in April is expected to reach 6% in the UK – a 30-year high. The cost of doing business will therefore become more expensive, while customers may begin to tighten their belts.The Bank of England will likely hike interest rates further in the coming months, so SMEs would be wise to ensure they are not financially exposed to any sudden rises and have planned for waning demand.
- Embrace further digitisation. Clearly the pandemic caused an acceleration of digitisation for many businesses and consumers, and this is likely to continue in the coming year. According to Salesforce’s Small & Medium Business Trends Report 2021, 71% of SMEs surveyed said they survived in 2021 as a result of digitisation efforts.There is demand for that trend to go further, adds Salesforce, with 77% of SMEs either already having or expecting to add an ecommerce offering in 2022. Similarly, 71% said their customers expected an online offering, while 72% said they had increased their online presence last year.
- Get your priorities straight. Ultimately, businesses need to look at the coming 12 months and prioritise the areas that will help them not only survive the tail-end of the pandemic, but thrive in its wake, explains Hiscox’s Patel. “2022 brings a sense of optimism for something that resembles normality however it hasn’t quite arrived yet. Prioritisation of this year’s focus areas is key for any business. The impacts from Brexit, the pandemic and accelerating digitisation are still rippling out and businesses will need to decide which changes are essential to continue their business but also which waves to focus on riding to accelerate their success. It will be very difficult to do it all without putting a strain on either the processes or people within the business.”