Economic risks push UK execs ‘to the brink’ as business confidence collapses in Aviva poll

UK business leaders have been pushed “to the brink” by an “onslaught of interconnected economic risks” as business confidence in the economy plummets, according to new research by Aviva. Publishing its third annual Risk Insights Report, Aviva says UK business leaders report that economic concerns, labour shortages and continued Brexit uncertainty are the top three risks facing UK businesses this year. Supply chain disruption is in fifth place and business interruption in sixth, adding to the economic pressures faced by boardrooms. Aviva’s index tracking business confidence in the UK economy “collapsed” in 2022 to -50 from +5 in 2021, which Aviva says was driven by concerns about the cost of living. “In 2021 we considered businesses’ net confidence in the UK economy to be low at +5%. 2022’s net confidence level of -50% signifies a veritable collapse,” Aviva says. Two-thirds of business leaders said they are worried about the impact of the cost of living on their business and 29% said the crisis would have a serious impact. In the poll of more than 1,200 business leaders, 45% of companies said supply chain disruption has impacted their business and 16% report total supplier failure over the past year. Some 38% report significant increases in supply chain costs as a result of systemic inflation, and 59% anticipate further increases in supply chain costs over the year ahead. More than half of UK businesses (54%) have made changes to their supply chains, including finding alternative suppliers, to manage disruption risk. Aviva says that despite this backdrop, 21% of UK businesses have either reduced, or are considering reducing, insurance cover, despite rising exposures. Based on analysis of its portfolio, Aviva says it is concerned that as many as half of UK businesses are underinsured. “Cutting corners on insurance can leave them exposed to considerable risk,” it says. Adam Winslow, CEO of Aviva UK & Ireland General Insurance, adds: “Businesses are all too aware of the impact of economic pressures on operations, but many may not appreciate the compounding effect of inflation or supply chain disruption in terms of insurance cover. Underinsurance within the SME community may not be new, but the threat it poses is now at a critical point.” Business leaders ranked shortage of skills as the second-biggest risk facing their business. The survey reveals that 58% have struggled to attract new employees and 57% have difficulties retaining staff. More than a quarter of firms say they have increased pay to attract or retain employees, which is adding to pressures on the bottom line. Energy costs are also weighing heavily, the report finds. Some 57% of UK business leaders said their business would be unlikely to survive a year if energy costs increase by five to ten times within the next 12 months. Aviva says many businesses are taking measures to reduce energy costs, with 65% taking at least one action to save money. Half have put in place energy-saving initiatives, 29% have invested to improve energy efficiency and 19% have installed renewable energy sources. Notable by its absence, Aviva said climate change and extreme weather has not polled as a top ten risk for UK businesses in 2022 or for the preceding two years of the survey. “While the climate crisis may not feel as pressing a risk as the economic concerns highlighted in the report, businesses need to have a plan to reach net zero by 2050, in line with the UK’s climate ambitions,” Aviva says.

Economic risks push UK execs ‘to the brink’ as business confidence collapses in Aviva poll

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