The annual Gallagher Business Risk Index, which surveyed 1,000 business leaders across the UK, has identified the top risks currently impacting organisations.
For the second consecutive year, the cost-of-living crisis has been highlighted as the primary concern, with 32% of businesses ranking it as their top risk. This marks an increase from 21% in 2023, signalling a worsening situation rather than an improvement.
Among the key reasons for the cost-of-living crisis being identified as the top risk are inflation, cited by 50% of affected businesses, unstable economic conditions (39%), and the lingering effects of Brexit (21%).
Despite the UK leaving the EU four years ago, the survey revealed that many businesses continue to struggle with declining trade success.
A shift in concerns among CEOs was also noted. Employee-related risks, such as retention, lack of skilled talent, and rising salaries, which were prominent in 2022 and 2023, have now dropped out of the top five risks.
This shift is reflected in data indicating slower pay growth and a reduction in job vacancies across some sectors, leading to increased competition among candidates for available roles.
The index also points to new and growing risks, such as cash flow issues, late payments, and market volatility, which have moved up in priority. Cash flow and late payments are particularly concerning for many business leaders, especially in light of company insolvencies in England and Wales increasing by 16% and 17%, respectively, in June 2024.
Another emerging concern is competition, identified by 20% of business leaders as a significant issue. This includes businesses facing heightened competition and decreased customer engagement, possibly due to shifting consumer spending habits and the rise of online shopping. It is noteworthy that at the start of 2024, one in seven retail shops was vacant.
Risk perceptions vary depending on the size of the business. For large firms, cyber-crime is the leading concern, with 25% naming it as their top risk. Data breaches are also a significant issue for these companies. In contrast, small and medium-sized businesses are more focused on managing the rising costs of trading.
The ongoing challenge of managing the increasing costs of materials remains significant, particularly for industries like construction and manufacturing. In these sectors, 40% of firms identified this issue as their primary concern.
Looking at the evolution of risks over the past three years, in 2022, the cost of materials was the leading concern, followed by employee retention and cash flow issues. By 2023, the cost-of-living crisis had emerged as the top risk, with the cost of salaries and a lack of skilled talent also ranking highly.
In 2024, the cost-of-living crisis continued to be the primary concern, with competition within sectors and the high cost of materials becoming more prominent. Other notable risks that have risen include cash flow, cyber-crime, and late payments.
Neil Hodgson (pictured above), managing director of risk management at Gallagher, commented on the survey’s findings, emphasising the ongoing challenges UK businesses face due to the cost-of-living crisis.
Although a recession has been avoided, the impact on spending levels remains evident. Hodgson also noted that the reduced focus on employee retention and rising salaries indicates a more favourable job market for employers in certain sectors.
Regarding concerns such as late payments, cyber threats, and data breaches, Hodgson suggested that businesses should consider insurance options to mitigate these risks.
He also recommended that companies take preventive risk management measures to enhance their resilience in a challenging economic environment and advised consulting with insurance brokers to explore available solutions.
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