Soaring inflation, worries over debt sustainability and growing concern over a dramatic slowdown in global economic growth due to rising interest rates are the issues dominating the headlines. The continuing conflict in Ukraine has led to buoyancy in the energy sector, in addition to trade in metals, minerals and chemicals, but the conflagration is a contributory factor to global inflation. A recent UNCTAD report on global trade in Q1 2022 posits that, in the short term and despite a busy first quarter, the inelasticity of global demand for food and energy products will likely result in higher trade values but lower trade volumes. Across many sectors, this presents opportunities and threats in almost equal proportion. Europe, despite the Ukraine situation, still has some of the safest (economic) harbours according to GlobalData’s Global Risk Report, which is based on GlobalData's Country Risk Index (GCRI), a unique model that determines the existing and future level of risk by assessing various qualitative and quantitative factors.
For example, with galloping inflation reaching 10.1% in the UK, SMEs are bracing for further financial strain. According to Grant Thornton UK LLP’s August Business Outlook Tracker companies report insufficient working capital, needing to restructure operations and needing to review headcount due to increased costs for technology, energy and salaries/benefits for employees. Many businesses have already taken remedial action to manage rising costs and defend profit margins. Over a third have passed on price increases to their customers (38%), deferred investment in R&D (37%) and renegotiated supplier agreements (36%). With the latest official GDP estimate confirming that UK economic output contracted in Q2 and the Bank of England predicting that inflation will continue to rise to more than 13% before the end of 2022, three quarters (74%) of the respondents expect increases in their operating costs to have a material impact on their profit this year.
Chris Petts, Restructuring Partner at Grant Thornton UK LLP commented, “This type of rapid change, which impacts so significantly on profit margins, presents an opportunity to develop innovative solutions which reduce reliance on fixed costs in favour of more sustainable models. For example, the massive increases in energy bills are one of the biggest price shocks to hit businesses this year. Business leaders can use this as a chance to revisit their operations to find opportunities to become more energy efficient and less reliant on third-party suppliers. This could be through investment in green technology such as solar or wind, or simple solutions such as reducing energy use, changing delivery frequencies, or moving operations to more sustainable buildings.” As much as the UK, these comments could equally apply to any territory.
In this issue, read a Thought Leadership piece on Cybersecurity by Samantha Louis, CEO, Praxity Global Alliance; Christine Nicholson, author and business mentor gives tips for finance management to non-accountants; an expert from Waddington Europe discusses sustainability in the circular economy within the packaging industry; a report by TMF group sheds light on FDI flow globally; Paul Loberman, untied’s chief product officer discusses software partnerships; and Rosangela Pereira Peixoto, RS Technical Regional Director, Russell Bedford Brazil looks at the approach business leaders need to take to get the best out of all generations at a firm.
There are ranking reports and tables for Malaysia and Vietnam with additional country tables covering South Korea, Hong Kong and China.
Zoya Malik
Editor-in-Chief, Financial Services Practice