Home Business SMEs shelve recruitment as they cope with cost crisis
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SMEs shelve recruitment as they cope with cost crisis

A quarter of small-to-medium sized companies (SMEs) are shelving recruitment plans as they cope with rising costs impacting their business, Paragon Bank research has revealed.

by uma
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Overall, 26% of SMEs said they were putting off planned recruitment due to inflationary pressures. The figure increases depending on the size of the company; 38% of medium-sized companies with between 50 and 249 employees said they would postpone recruitment, compared to 25% of companies with up to 10 employees.


Meanwhile, 22% of companies said they would reduce staff numbers, either through natural attrition or redundancy. Again, the occurrence of staff reduction was greatest in medium-sized businesses, with 38% of companies planning to cut employee levels. 

Other measures companies are taking to tackle the cost crisis includes sourcing alternative suppliers (30%) or renegotiating contracts with existing suppliers (23%). Over one in five businesses (22%) said they would take out a loan or other finance facility to aid them with cashflow issues, with 20% stating they would cut research and development costs.

Companies are struggling to pass on increased costs to their own customers. Only 22% of medium-sized companies have been able to increase their own prices, with over half (54%) unable to because they are locked into a contract with a customer. In addition, 13% would like to raise prices but are unable to do so as it would make them uncompetitive.

John Phillipou, Paragon SME Lending Managing Director, said: “SMEs are enduring inflationary pressures not seen for 40 plus years and that is clearly impacting on their capability to invest in their business and putting a strain on cashflow. One in three companies are experiencing cashflow issues, with 44% stating that cost pressures have started to hit their financial performance through reduced sales or profit.

“It’s important in these challenging times that companies maintain strict financial discipline and examine all avenues to help each cashflow pressure on their business. One area companies could look at is either refinancing or extending the terms on physical assets to release cash. Alternatively, they could consider leasing equipment rather than buying. There are many options and I would urge SMEs to talk to their financial provider to explore how they can help.”



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