Broker reveals financial uncertainty as top risk for UK firms

The impact of financial uncertainty is the risk of most concern to businesses across the UK over the next 12 months, new research by Marsh has revealed.

Figures published by the broker yesterday (23 October 2023) showed 34% of firms were worried about finances due to rising inflation, energy prices and raw material costs.

And the data suggested that smaller firms had the most concerns – almost half of microbusinesses (43.9%) and 33% of small and medium sized enterprises (SMEs) cited financial uncertainty as a key risk.

The concerns are a result economic headwinds – for example, inflation started to bite in 2022 and was exacerbated by the conflict in Ukraine and knock-on effects on energy markets.

Alistair Fraser, chief executive of commercial and corporate at Marsh UK, said: “The UK risk environment over the last year has been heavily impacted by macroeconomic changes, as well as the trickle-down effects of geopolitical events.”

Underinsurance

This came after Allianz revealed earlier this year (23 March 2023) that one in five SMEs across the UK had begun to reduce the level of their insurance coverage due to financial pressures.

The poll, which surveyed 500 SMEs on their biggest day-to-day challenges, revealed that 71% of respondents said cost of living pressures were having a negative impact on their business.

However, while financial uncertainty was the risk firms were most concerned about, the number of businesses that were worried about it was not as high as in previous years.

Data showed 43% cited it as a concern in 2021, while 37% did in 2022.

Marsh said the drop was down to businesses strengthening their financial resilience during the pandemic.

And 50% expect an increase in productivity in the year ahead, while 47% expect an increase in turnover.

Other risks

The figures were published in Marsh’s UK Business Risk Report 2023, which features data obtained in May and June 2023 from over 2,100 UK businesses with turnover of between £100,000 and £500m per year.

Data showed that people-related risks was also a top concern, with employee mental health and wellbeing (31%), talent retention, attraction and succession planning (22%) and health and safety of the public and employees (21%) taking second, fourth and fifth place.

Meanwhile, environmental, social and governance (ESG) standards were identified as a priority for the majority of UK businesses, with just over half (55%) of respondents understanding ESG requirements and half (50%) incorporating it into business strategies.

”From sole traders and fast-growing companies to large established corporates, no commercial entity in the UK is exempt from requiring a robust approach to risk management,” Fraser said.

”This report tells a story of the very broad spectrum of risks facing UK businesses and provides practical advice on how to tackle them, helping strengthen the resilience that they need to grow with confidence.”