Large firms see rising costs as biggest risk in next year, says Edinburgh-based consultancy Proteus – but it also sees signs of 'resilience'

Three-quarters of senior decision-makers in large UK businesses have identified rising costs as the biggest risk to their organisation next year, according to Edinburgh-based consultancy Proteus – but it has also singled out signs of firms’ “resilience and determination”.

The specialist change and transformation company’s Drivers of Change study found that more than half of respondents believe rising energy bills will be a big risk to their business in 2023, with a further 37 per cent flagging rising staff costs, while three in ten are worried about rising infrastructure expenses (such as premises and tech). Wider economic turbulence was also perceived as a threat in the year ahead, with 45 per cent of business-leaders concerned about the risks posed by the weak pound, and nearly four in ten feel anxious about volatile markets.

About a third are worried about difficulties with staff-retention and recruitment next year, with a quarter fearing a risk of increased competition in their market, and 13 per cent nervous about the prospects of foreign direct investment/hostile takeover, and areas with the highest chance of corporate cuts are advertising and staff bonuses (both 15 per cent).

Proteus, which earlier this year acquired Edinburgh-based software specialist Sharktower in a multi-million-pound deal, however also found that most leaders reported intentions to increase spending across key corporate priorities in the year ahead, and, across 13 categories of outlay, the majority expect their outgoings to increase in every area except staff bonuses, acquisitions, and charitable spending.

Craig Mackay, CEO of Proteus, says: 'There is a thin, but visible, silver lining to the current economic crisis; the resilience and determination of British business.' Picture: contributed.

The biggest increase in spending is set to be on software such as enhanced IT systems; 70 per cent of businesses plan to shell out more in this area in 2023, and 58 per cent feel the same about infrastructure (e.g. machinery and laptops). Furthermore, about seven in ten leaders are set to increase their spending on sustainability initiatives, and a mere 4 per cent will cut their spend.

Encouraging

What’s more, nearly two-thirds are investing in staff training, which Proteus sees as “especially encouraging given that staff costs, recruitment, and retention were identified as core business risks for 2023 and indicates a wider recognition of the importance in investment in staff to help mitigate the risks”.

Proteus chief executive Craig Mackay said: “The road ahead will not be without hurdles. The pace, volume and complexity of change is increasing exponentially and businesses can’t afford to wait and see – firms that are too slow to adapt risk becoming irrelevant. Leaders must follow through with their intentions to increase spending on staff training, innovation, and transformation, to ensure they have the technology and expertise to keep up.”

Bur he also flagged signs of a “thin, but visible, silver lining to the current economic crisis; the resilience and determination of British business” – adding that an economic downturn “can be an opportunity as well as a threat”. He continued: “Those businesses which have the finances available would do well to consider their options for growth and change, in order to come out of the hard times stronger. For any business, organisational clarity is essential from the outset. Those with a shared vision of the objectives and outcomes the organisation is trying to achieve, and how it will need to adapt or restructure to achieve the desired outcomes are more likely to reap rewards.”