Supply chain issues fuelling multiple pressure-points for businesses - RSM

More than a third (39 per cent) of middle market businesses have experienced supply chain issues within the past 12 months - and this likely represents the tip of the iceberg as disruption looks set to continue.

That 's according to RSM UK 's latest 'The Real Economy ' report, which says the pandemic, the war in Ukraine, the aftermath of Brexit and the soaring cost of energy and manufacturing materials have created a perfect storm that is hitting the bottom line of many middle market businesses.

The Prime Minister 's resignation is also likely to cause further uncertainty for businesses, at least until it is clear who will succeed him.

RSM 's research showed unanticipated supply chain issues have led to 44 per cent of middle market businesses experiencing significant increases in their operating costs, while 42 per cent said they 've seen their profits decline.

The top five supply chain issues that businesses are currently experiencing include delays with orders (48 per cent), increasing costs (46 per cent), missed deadlines (37 per cent), orders not fulfilled (35 per cent) and poor communication from suppliers (34 per cent).

One in three (34 per cent) business leaders said the pandemic was the main driver of the supply chain challenges, and around one in five (18 per cent) blamed Brexit for the ongoing turmoil.

Other reasons for the disruption included increased shipping costs, cited by 16 per cent of respondents, events in Ukraine (12 per cent) and increased competition for scarce resources (10 per cent).

Mark Taylor (pictured), regional managing partner at RSM West Midlands, said: “The first supply chain shocks, mainly from coronavirus related chaos, were most acutely seen in advanced microchips, semi-conductors and high-end consumer goods.

“But now we have a more general supply chain issue affecting basic necessities too, and this is when the supply challenges really start to bite.

“Add to this the impact of generally higher transportation costs and customs and duty requirements at the borders, with the ongoing geopolitical landscape not improving for the foreseeable future, it 's very likely prices will continue to rise.

“Given the nature of the West Midlands economy, and its considerable manufacturing base, these supply chain issues will have a particularly acute impact locally. ”

Soaring energy costs and wage growth expectations are also compounding the problem for many businesses, reducing remaining profits and stakeholder returns.

Mark Taylor added: “The EU decoupling from its dependency on Russian fuel has started, but it will take time and will not be an easy transition process. It is inevitable that it will cause tension economically and geopolitically, and spread down to hit established international supply chains, increasing costs. ”

Around 63 per cent of middle market businesses surveyed said their supply chain issues were also causing problems for their downstream customers.

More than half (53 per cent) said they 'd been delayed in fulfilling their customers ' orders and 43 per cent had increased the price of their goods significantly.

Around a third (33 per cent) admitted some orders were not fulfilled at all.

To address the problems, in the past year almost half (42 per cent) of businesses have increased the number of suppliers they use in an attempt to become less reliant on one source, a third (33 per cent) have nearshored the supply chain and 41 per cent are considering nearshoring within the next 12 months.