Global professional services firm KPMG is supporting companies across the region to navigate the increasingly complex economic challenges they are facing as they continue to target growth. Pete Rowe, Senior Partner for KPMG’s Milton Keynes practice, explains.
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FOLLOWING a challenging few years, it now looks as if the UK is heading for a recession which could see the economy shrink by more than two per cent by the end of 2023. So what can local businesses do to prepare for challenges ahead?
KPMG’s recent CEO survey found that more than two-thirds (69%) of UK CEOs believe a recession will make it harder to rebound from the pandemic and 63% believe it will disrupt anticipated growth over the next three years.
Many of our local businesses are having to make hard choices now to help their businesses to weather the challenging conditions they face. For our army of start-up businesses and entrepreneurs, the slowdown in venture capital and private equity investment means looking for new ways to attract funding and conserving cash to better position themselves for a new funding round as the economy recovers.
It is not all doom and gloom, however. Our local transactions teams have had a busy year with plenty of deals still happening as good businesses attract the investment they need and the local businesses we speak to are confident there is a light at the end of the tunnel.
So what are the areas on which businesses are focused as they plan to weather the economic storm ahead?
COSTS
Getting a handle on a changed cost situation and taking costs out of a business to protect profitablity is a key focus. There is not one solution. It will depend on the business – and potentially even the sector – but cost improvements that a business should be thinking about will include revisiting finance arrangements and renegotiating debt interest with lenders, reviewing and renegotiating contracts and better data insights to fully understand the profitability of your product range, markets or customers.
TAX
The Chancellor put tax at the heart of his recent Autumn Statement in an effort to create stability, but for many businesses, the tax system can feel complex, and not the valuable lever it can be to grow or invest in a business. Often tax is the area that is addressed at year end and not considered up front as part of the decision making process. Key initiatives to look at in attempting to unlock capital include making an R&D claim or looking at the super-deduction which allows companies investing in qualifying new plant and machinery assets to cut their tax bill by up to 25p for every £1 they invest.
TALENT
The ability to recruit, retain and upskill staff will be crucial to the future success of our local businesses. Now is the time for businesses to identify the knowledge and capability gaps that they have now and are likely to have in future and to engage with their workforce to make sure they are equipped with the skills to overcome them to help to future proof their business.
Having a strong employer proposition to recruit the talent needed to take a business forward is vital. Across our offices in Milton Keynes and Watford, we are continually assessing our employee value proposition to ensure our firm represents the values of our people and creates a sense of belonging.
ESG
Environmental, social and governance initiatives are not only growing in importance for investors, customers and regulators. They are also important to help improve financial performance and driving growth. Now is not the time to be pausing planned ESG initiatives. Delivering a sustainable recovery from the pandemic and recession and making decisions that address our societal challenges will benefit us all in the long run.
As we head into what will be a difficult winter, I am certain that our local business community is ready to weather the challenges ahead and be in a stronger position to benefit from the upturn when it comes.
Pete Rowe is Office Senior Partner for KPMG in Milton Keynes and its 125 staff based near Bletchley Park.
