Supply chain problems: what's being done to solve them?

Many small businesses have experienced supply chain issues this year, leading to rising costs, stock shortages, and delayed projects.

As 2022 approaches, what’s the current situation, how can small businesses navigate complex supply chains, and what’s being done to solve the problems?

• Supply shortages: tradespeople lose £3.5 billion
• A guide to paying PAYE for small businesses
• A guide to bookkeeping for small businesses
• Do I need employers' liability insurance?

What’s caused supply chain problems?

Supply chain problems have been caused by factors including the Covid-19 pandemic and Brexit.

For example, global travel restrictions have increased the cost and time it takes to import goods from other countries. This has been compounded by the introduction of new tariffs and customs duties following Brexit.

The impact of the pandemic and Brexit have also combined to affect the availability of workers, which has caused problems in supply chains.

How have small businesses been affected?

Even before the recent fuel shortage, a third of mid-sized firms surveyed by accountancy firm BDO said they’d reduced their product lines or services to manage staff or stock shortages.

The survey also revealed that almost one in three mid-sized businesses expected to increase the cost of their products or services in the next three to six months, while almost a fifth said they were increasing wages to attract new staff.

The prospect of having reduced stock and increasing prices is an unwanted challenge for retailers and hospitality businesses, many of which had to close for large parts of the last 18 months.

Similarly for tradespeople, shortages and supply chain issues are leading to delayed projects and work that needs to be turned down.

Of 250 tradespeople recently surveyed by Simply Business, 70 per cent have had to turn down work at an estimated total cost of £3.5 billion.

The impact of the HGV driver shortage

One of the biggest causes of supply chain problems in recent months has been a shortage of HGV drivers.

A range of factors have contributed to a shortage of HGV drivers, including:

• drivers retiring with a shortfall of new workers entering the industry
• Covid-19 restrictions and Brexit limiting the number of European drivers in the UK
• a backlog of tests due to the pandemic stopping new drivers from getting qualified
• complex IR35 rules that can lead to self-employed HGV drivers paying more in tax

According to the Road Haulage Association (RHA), there’s a shortage of more than 100,000 qualified drivers in the UK.

In response, the government introduced temporary visas for 5,000 lorry drivers to work in the UK, although only a limited number of applications have been approved so far.

Will Budget measures ease the driver shortage?

As part of the recent Autumn Budget, Chancellor Rishi Sunak announced several measures to help ease the HGV driver shortage and the impact it’s having on supply chains.

Here’s an overview of what was announced:

• confirmation of the relaxations on temporary visas
• new lorry park plans to improve facilities for drivers
• an extension of the HGV levy through to 2023
• removal of vehicle excise duty on HGVs
• a new ‘Scale Up Visa’, with the aim of making it quicker and easier for businesses to bring in skilled workers from overseas

Will the Plan for Jobs and extra spending reduce skills shortages?

Another driver of supply chain issues, particularly for trades businesses, has been a skills shortage.

Training new workers has been disrupted by the pandemic, while Brexit has had an impact on the number of workers coming to the UK from the EU.

In many industries, this has led to a higher-than-average number of job vacancies, with many larger firms offering sign-on bonuses to attract new staff.

In a bid to close the skills shortage, the Chancellor confirmed during the Budget that skills funding will increase by an extra £3.8 billion, including £1.6 billion for new T-level courses, £170 million for apprenticeships, and £550 million for reskilling adults.

Alongside the Plan for Jobs first announced at the Conservative Party Conference, the government included extra measures intended to reduce skills shortages in the Budget, such as:

• increasing the national living wage to £9.50 from April 2022
• giving small businesses £3,000 incentives for hiring apprentices
• extending the Kickstart scheme until March 2022

Has your business suffered from supply chain issues? Let us know in the comments below.

Photograph 1: Syda Productions/stock.adobe.com