Firms in the supply chain facing financial distress

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A new study has revealed that rising food and fuel prices are putting significant financial pressure on businesses in the UK supply chain, due to rising energy and food prices.

Around 22,000 businesses in sectors such as logistics and wholesale are facing “significant financial distress”, which could lead to insolvency and higher prices for consumers, according to the report.

Since Brexit the pound has fallen by around 16 per cent against the dollar, significantly pushing up the cost of imported goods.

The report also warned that the new National Living Wage, which may increase to £9 by 2020, is likely to add more pressure and increased prices to consumers.

Industrial transportation and logistics businesses experienced the largest increase in significant financial distress in the first quarter of 2017 going up by 46 per cent year-on-year, largely because of rising fuel costs.

Meanwhile, levels of distress in the wholesale sector rose by 16 per cent and were 15 per cent higher in the food and beverage sector.

Although food suppliers, logistics firms and wholesalers are yet to fully pass on these rising costs to their customers, the report concludes that it is only a matter of time before this starts to happen.

This pressure in the supply chain will have a knock-on effect of further pressure on sectors exposed to discretionary spending, such as bars and restaurants, retail, travel and leisure.

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