Home Business NewsBusiness Latest inflation figures cast serious doubt for smaller firms facing disproportionate hike in cost of financing

Latest inflation figures cast serious doubt for smaller firms facing disproportionate hike in cost of financing

by LLB Reporter
20th Jul 22 8:58 am

This morning’s CPI figures could cause serious problems, particularly for smaller businesses whose cost of capital will rise disproportionately in comparison with larger firms.

Despite these figures suggesting some anemic growth in the UK economy as a whole, the reality is that many UK businesses are staring down a period of stagnating or declining growth. Post pandemic inflation was widely anticipated, but skyrocketing commodity prices have exacerbated this and central banks are playing a game of catch up. This has created the perfect storm for UK businesses as they suffer input cost inflation, flatlining growth and increasing cost of borrowing – all putting a real strain on business’ cash flow and working capital.

Alistair Baxter, Head of Receivables at Taulia, the working capital management solutions business, said: “Smaller firms in particular could struggle as their costs of finance will increase disproportionately compared to bigger firms with more stable books. The difficult decision to either hunker down and weather the storm or find ways to generate growth and outpace inflation is now facing most businesses. Whichever option they choose, careful management of working capital is perhaps more important now than it has been in the 40 years since inflation was last at current levels.”

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