The survey from the organisation’s business restructuring services team found that supply chain issues are at the top of a long list of concerns for businesses and almost half of businesses said net-zero plans have been superseded by more immediate concerns.
More than 400 distressed businesses were surveyed for the report including listed and private companies with revenues spanning £25 million to more than £1 billion. As well, 165 investors across the UK were also surveyed to find out how they are responding to the economic downturn.
The findings showed the majority of businesses are highly focused on getting through the short-term challenges ahead.
Of the immediate challenges to business growth, ongoing supply chain issues are of most concern with almost half (47 per cent) saying it is an immediate threat to their business. To further compound the threat, just over a third of respondents said they have done no preparation for supply chain issues and 33 per cent said they lack sufficient data to understand the risks in their supply chain.
As well as supply chain issues, the winding down of COVID-19 support measures (40 per cent), skills shortages (35 per cent), rising inflation (32 per cent) and energy costs (31 per cent) made up the five biggest challenges to business growth in the survey.
While they focus on the immediate challenges, businesses said they have pushed mid-to-long term priorities like ESG down the list with almost half (47 per cent) of respondents saying net-zero strategies are less of a priority than last year. However, the majority of investors, almost three-quarters (74 per cent), are clear that ESG remains a factor in their lending decisions.
Steve Russell, head of business restructuring services at PwC, said while dealing with pressing concerns such as supply chain issues or skills shortages, businesses should consider the longer-term impact of challenges such as sustainability and digitisation.
“Doing so will help them remain attractive to investors and more competitive both now and in the future,” he said.
The report highlighted how businesses are planning to respond to the challenges they are facing with many recognising the value of restructuring and introducing operational improvements. When asked what steps businesses were taking to improve business performance, digital transformation (58 per cent) was the most popular followed by supply chain management or optimisation (56 per cent).
Over the next two years, businesses will review personnel, restructure business models and supply chains motivated by improving working capital efficiency and rationalising costs to offset energy costs and other inflationary pressures.
Nearly a quarter (23 per cent) of businesses have said they intend to downsize their workforce through automation, although the report also showed that 60 per cent of businesses considering automation aren’t planning to reduce their staff numbers.
“Finding the right support to navigate the challenges businesses are facing is critical. These economic challenges are set to become more acute and those who fail to act now will fall further behind as the picture looks to worsen in the months and years to come,” Mr Russell said.
Issy Gross, restructuring and insolvency partner at PwC, said pressures will continue to ramp up for all corporates over the next few months — cost of debt, wage inflation and energy to name a few will apply more pressure still.
“We estimate October energy contract renewals will still lead to at least a doubling in prices for businesses, even after the application of the government’s corporate price cap and support available post April is not clear,” she said.
“The cost of borrowing is rising at rates not seen in decades, with many corporates and individuals already carrying high levels of debt. Companies need to act now to preserve cash and get their forecasting in order, conducting scenario planning to understand what kind of changes might ‘break’ the economics.”
