Global events have been incredibly difficult for many business owners over the past few years. While some businesses have been able to capitalize on events across the globe, many have been left struggling. From physical fulfillment limitations to supply chain issues, substantial price increases and general shakeup of what customers want, need, and expect have all come into play.
The Covid-19 Pandemic
The pandemic affected everyone across the globe in one way or another. And it particularly hit business owners with global supply chains. When lockdowns hit, many companies had to stop working altogether (not everyone could operate from home/ remotely) or run at a severely limited capacity. We could no longer source the products or raw materials. We could no longer hold face-to-face meetings with clients and, for a while, were unable to shop anywhere that wasn’t a necessity.
For most businesses, this was, of course, a huge issue, and while government help did arrive for businesses, it was still a considerable disruption and not something all could recover from. Even businesses that operate digitally were affected since these services were being utilized by other companies or customers that no longer knew what their financial future would hold. So retracted many ‘extras’ and services they thought they could live without for a while.
Although life has returned to normal in many ways, the Covid-19 pandemic is still causing its issues. From experiencing huge backlogs and delays in all kinds of areas, businesses still struggle to access the services, materials, or products they need. The fragility of many types of businesses means that even small changes can massively throw out the balance of things and lead to failure
Brexit has affected much more than just the countries involved directly. The most immediate impact of Brexit for US companies has been the need to treat the UK and EU as separate global trading partners. Not much has changed for US companies that export goods to the UK for resale inside their borders.
However, for US companies that have historically used the UK as a distribution gateway to the EU market, that arrangement is now fraught with complications. One of the main issues is that goods originating in the US and entering the EU through the UK are no longer duty-free. As a result, businesses can expect customs delays and incur additional costs for taxes, fees, documentation, and the additional personnel needed to manage it all.
Distributors to the EU will now need to establish a physical presence in countries they are exporting to, which might not be practical for many US companies. Especially those small to mid-size companies that built their business models based on the assumption of free access to EU markets.
Russia- Ukraine Conflict
The Russia-Ukraine conflict has some of the most significant impacts on businesses. The global supply chain, which has not fully recovered from the COVID-19 pandemic, has been hit further in the wake of the Russia-Ukraine war. Businesses that source materials and goods that depend on Russia or Ukraine can expect even longer lead times. Businesses should therefore evaluate their supply chain risk and make inventory decisions accordingly.
Cost of Living Crisis
The cost of living crisis and huge rates of inflation have come as a result of all of the above global risk factors. When everything costs go up, businesses need to put their prices up, which can price out many of their existing customers. Businesses selling products or services that are ‘nonessential’ will be hit the hardest as customers struggling with money will cut these items from their budget first. The cost of food and raw materials was already rising before the conflict broke out due to the COVID-19 pandemic, with supply chain disruption and energy price increases. However, since Russia invaded Ukraine, prices of the like of wheat have risen sharply.
The escalating cost of certain products is harming businesses that rely on them. Ukraine accounts for about 20% of beer’s usage of barley, meaning the conflict in Ukraine is threatening to push the price of the likes of beer up. Such rises would inevitably impact small businesses that rely on beer, such as bars and restaurants. Gas increases are also a problem; businesses that rely on gas for operations are feeling the pinch, with higher charges at the pumps directly impacting cash flow.
Global energy prices have risen sharply, primarily due to the invasion of Ukraine and trade and production disruptions caused by the Russian invasion of Ukraine; the Bank is forecasting a 50% rise in energy prices this year. From attacks on nuclear power plants to damage to the infrastructure of natural gas (of which Russia is the largest exporter), there are many energy issues that have come about as a direct result of the war.
Higher energy prices mean higher costs for businesses. These higher costs usually come with higher prices for the product or service that the customer pays. When customers can no longer afford the products or services a company sells, this will result in losses for the business and means your company may no longer stay afloat.
If you’re thinking of starting a business in this climate or you’re already running a company and wondering what comes next, keep an eye on global events. Claim any assistance you qualify for from the government, and do your research so you can make intelligent decisions for your business’s future.
What global events have caused your business the most significant issues in the past few years?