Soaring prices of materials and cost of living crisis are the top risks facing North West businesses

• Business leaders across the North West say that the cost of living crisis and the  increased price of materials are the top risks they face to successful trading
• Employee retention was also cited as a major risk by many local business leaders coming joint third place with outstanding late payments
• The cost of salaries also moved up four places in 2023, taking the spot as the fourth biggest risk facing businesses in the North West

The annual Gallagher Business Risk Index asked 1,000 leaders of UK businesses to identify the top risks affecting their firm. The current cost of living crisis was ranked joint first with the increased price of materials, according to 24% of businesses leaders in the North West.

When asked why they had chosen the cost of living crisis as their top risk, the major driving factors were said to be inflation (44%), economic instability and uncertainty, changes to UK legislation and the impact of Covid-19 (24%).

In comparison, Gallagher’s 2022 Business Risk Index revealed the top challenge facing businesses in the North West was cash-flow.

Outstanding late payments owed to businesses featured on the top ten list of risks for the first time and was ranked second in conjunction with employee retention (18%), which featured higher on the list compared to last year. Employee retention was said to be a challenge due to the inflationary environment (33%), whilst 25% of business leaders said it was due to a reliance on technology which could be due to a skills gap as new equipment and technology is increasingly being used. Meanwhile, 53% of leaders said the current economic instability was the main cause of late payments owed to their business.

The cost of salaries ranked higher this year, taking third place (16%) and was said to be due to the impact of the cost of living crisis. The lack of skilled talent closely followed (14%) and was a new entry on the list this year, with 44% of business leaders saying there was currently a smaller pool of suitable candidate and industry competition for talent.

Despite economic uncertainty and the war in Ukraine causing supply chain disruption, the risk fell to bottom of the list having been ranked the second biggest risk last year. Similarly cash-flow issues fell to fourth place this year, despite North West businesses saying they were facing the impacts of inflation and economic instability.

Table 1: Top 10 risks identified by businesses in the North West in 2022 and 2023

*1,000 business leaders across the UK were asked to select the current top risks to their organisation – this is the percentage that selected each risk factor

Commenting on the findings, Chris Patterson, Regional Managing Director of the North West, Gallagher, said: “Our Business Risk Index shows the bosses in the North West are facing challenging and changeable risks to successful trading. The cost of living crisis currently shows little slowdown and for many businesses this will have a knock on effect on sales as well as affect their employees personally. Leaders in the North West have also seen themselves struggling with the cost of materials which is having a direct impact on their business.

“When it comes to concerns like debts, late payments and fraud, businesses can protect themselves against these kinds of financial risks by considering insurance which helps protect their business against the impact of these crystallising. There are many steps, including preventative risk management measures that businesses can take to become more resilient to the tricky economic environment and leaders should speak to their insurance broker to help them understand the options available to them.”