What Challenges are on the Horizon for Business Owners in late 2023

A report from the Office for National Statistics in May 2023 highlighted the ongoing challenges affecting UK businesses, with energy prices and continued inflationary pressure on the cost of goods and services as the top two concerns affecting business conditions of those surveyed.

Headline statistics from SME businesses reported that 31%faced worker shortages, 53% stated employees worked increased hours, 23%reported an increase in the hourly wages and almost 1 in 10 businesses were directly or indirectly affected by industrial action in March.

Factors affecting profitability will be a cause of concern for owners/managers, and within this article Glenville Walker explores howbusiness owners can mitigate against some of the main challenges facing businesses in the second half of 2023.

Supply Chains

Increased pressure on national and international supply chains as a result of Brexit, the Covid-19 pandemic and the war in Ukraine has led to labour shortages and made it more difficult for businesses to obtain reliable timely delivery of materials and goods. The manufacturing industry, retail and wholesale trade, and businesses dealing with motor vehicle repairs have all been reported to have faced logistical issues within their supply chains with rising freight prices, raw materials shortages and congestion at ports amongst the many reasons for supply chain issues.

Businesses can reduce the risk within its supply chain by having a range of reliable suppliers that can provide those materials and goods, by using different geographic locations where possible. However, those businesses should review their existing supplier contracts to ensure there are no exclusivity provisions and establish whether diversification is financially practical, i.e. do those contracts contain minimum order provisions that could negatively impact the price paid to existing suppliers?

Digital Transformation

The ‘digital transformation trend’ is unlikely to go away and the strategic implementation of digital solutions can improve business processes, and lead to an improved service for its recipients. Digital transformation can provide a competitive edge to marketing through the optimisation of digital channels, it can improve the customer experience and positively impact profitability whilst analytics can lead to faster, informed decision-making.

Adopting digital solutions can increase the potential to collaborate with like-minded businesses and increase the product or service lines offered to customers, however, channels of communication need to be secure to avoid the financial consequences of leaked data.

Data protection was an ‘en vogue’ topic in the last 5-10years but the risks associated with processing personal data remain. Businesses considering digital transformation should consider its legal implications and mitigate any data processing risks within its contractual documentation with suppliers, contractors, distributors, consultants, and customers.

Hybrid/Remote Working

Numerous employees have enjoyed the benefit of working part if not all of their time at home since the Covid-19 pandemic, and although some businesses have encouraged employees to return to the office on a more regular basis, others considered whether it is necessary to rent the floor space they occupied prior to the pandemic.

Businesses that have embraced a hybrid/remote working policy may want to review the underletting provisions in its lease, as it may be possible to underlet space at the “open market rent” in order to free up capital for other objectives, however, the pool of businesses that are willing to underlet in challenging economic times may not be significant.

Relationships between shareholders

Some entrepreneurs are resilient and thrive in challenging times, however, irrational thinking can replace sound decision-making when the pressure to run a business profitably increases as business owners are not immune to the impact of the rising cost of living and the demands of customers, employees and other stakeholders.

What can you do if your fellow shareholder takes a dividend out of the company without your authorisation? What protections do you have asa minority shareholder if the majority shareholder sells his/her shares to someone you do not want to be in business with? Is it fair to you if a shareholder behaves unprofessionally, cashes in on their shareholding and leaves you with a legacy of problems within the business?

Many business owners will not have a written shareholders agreement to govern these and other possibilities on the basis they do not believe the relationship between shareholders will ever deteriorate.

Have you noticed a change in your fellow shareholders behaviour recently? It might be the right time to document the relationship between shareholders in a shareholders agreement so that you have legal protection in place.

Need help?

If you would like any help and business law advice inparticular related to any contract or shareholders agreement, please contactour specialist corporate team on 0151 305 9650 or email hazel.walker@glenvillewalker.com

This article is not intended to be interpreted as advice.

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