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What will 2022 bring for UK businesses?

business-articlesWhat will 2022 bring for UK businesses?

This year has been a challenge to say the least. The UK emerged from the winter lockdown into a promising spring, only to knocked about by the summer squalls of the pingdemic and a global supply chain crisis.

Many of us will be glad to see the back of 2021. But will next year be any better? Let’s take a look at the challenges, trends and opportunities that may arise in the new year.

Brexit border checks

Next year could see some major developments as the UK continues to implement its Brexit strategy and iron out the kinks.

Back in September, the government delayed some checks on EU imports for a second time, citing the ongoing impact of the pandemic and the global supply chain crisis. According to the new timeline, the second phase of the UK’s border operating model will come into effect on 1 January, and phase 3 will begin on 1 July.

While these rule changes are primarily for EU goods coming into the UK, they could have knock-on effects for British businesses. Import costs could be slightly higher and there may be more limited availability, which in turn could be a boon for British producers.


Shipping problems to continue

A big issue facing businesses right now is the global shipping crisis, with delays at ports across the globe. Vessels are waiting weeks to unload cargo in congested ports, causing shortages on the shelves and disrupting some company operations.

The good news is that this is set to ease next year. The bad news is that it could take until the end of 2022 for the global shipping industry to return to normality, according to a data analysis by Sea-Intelligence.

Hopefully the situation in the UK will improve before then. The British Ports Association (BPA) believes delays will persist until spring next year. But as snarled-up supply chains untangle themselves, delays and cost pressures could ease.

Inflation peaks and interest rates rise

Speaking of cost pressures, inflation is projected to rise through the first part of 2022 and we’ll likely see the Bank of England (BoE) enact multiple rate hikes.

In the bank’s November monetary policy report, the BoE said it expects inflation to peak at around 5% in April next year. However, inflation has consistently overshot expectations so there’s a chance it could rise higher and last longer.

Markets are once again pricing in a rate hike at the bank’s next meeting (16 December) after post-furlough employment reports indicated a strong labour market and the UK’s CPI jumped to a ten-year high in October.

Whether the BoE hikes rates this year or not, next year will almost certainly bring multiple rate rises, and these could significantly affect businesses. Check out our article ‘How could a rate hike affect UK businesses?’ for more detail.

Autumn budget announcements

The new financial year will also bring many of the changes announced in Rishi Sunak’s autumn budget. Here are some of the moves most likely to impact business.

Business rates relief
To help support industry through the post-Covid recovery and ‘create stronger high streets’, retail, hospitality, and leisure businesses will be able to claim a 50% reduction in business rates up to £110,000.

Recovery loan extension
The Recovery Loan Scheme has been extended until 30 June 2022. This means you can apply for a loan of up to £2 million which will be 70% backed by the UK government.

Minimum wage increase
The national minimum and living wages will go up. The minimum hourly rate for workers over 23 will go up from £8.91 to £9.50, while for people aged 21-22 it will increase from £8.36 to £9.18.

National Insurance increase
Announced earlier this year, the 1.25% National Insurance hike could be a big blow to many UK businesses.

VAT rise to pre-pandemic levels
After being slashed to 5% to support businesses during the pandemic, then rising back to 12.5% in October, VAT will return to its pre-pandemic level of 20% when the new financial year begins.

Sustainability

Sustainability has been the most bandied-about business buzzword of the past two years. But being an eco-conscious business is steadily shifting from a cynical selling point to a necessity.

As the climate crisis worsens and consumers try their best to lessen their impact on the environment, businesses that aren’t also doing their bit will struggle to survive. The companies that adapt to meet their customers’ expectations will be the ones who thrive.

Veganuary offers an excellent opportunity to tap into a more eco-conscious market while trialling out new, more sustainable products. Beyond that, looking at ways to cut your carbon emissions and communicate your green credentials is well worth it.

Employee experience and the talent pool

During the darkest depths of the pandemic, remote working became a crucial tool to limit the spread of Covid. However, as many people found that a home-based or hybrid working model suited them, homeworking is here to stay.

In fact, the virus simply sped up an already-growing trend. And with digital infrastructure better than ever before, the rise of the gig economy and Gen Z increasingly entering the workforce, the employee experience could undergo further changes in 2022.

On top of that, businesses will have to contend with a competitive labour market and skills shortages. Employers may have to work a little harder to attract the best talent, but this could mean that fostering a positive company culture and enabling a work/life will become increasingly important.

Uncertainty and resilience

While we can and should plan for the coming year, Covid is still creating a huge amount of uncertainty. The pandemic has sent ripples across the global economy, with long-lasting and often unpredictable consequences. Therefore, it's important for businesses to become resilient and adaptable.

If you deal with multiple currencies, there are some really effective ways to protect against volatility. Tools and services such as forward contracts and options can help you plan effectively and potentially limit losses. You can even get help with a personalised risk management strategy.

So these are some of the things to look out for in 2022 but be prepared to adapt. Let’s hope next year we can really put the pandemic behind us.

Currencies Direct

Currencies Direct

Currencies Direct is one of Europe's leading non-bank providers of currency exchange and international payment services. Since we were formed in 1996, we've maintained our focus on providing innovative foreign exchange and international currency transfer services to corporations of all sizes, online sellers and private individuals. We have also expanded our services to provide dynamic and pioneering "business to business" solutions to help companies, tier 2/3 banks and other non-bank financial institutions to process their international payments. Our headquarters are in the City of London (United Kingdom) and we have operations in continental Europe, Africa, Asia, and the United States. Currencies Direct is jointly owned by private equity firms Palamon Capital Partners and Corsair Capital.

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