Real and present dangers

Given the impact of the cost-of-living crisis on business, it’s important to protect yourself against cyber crime, underinsurance and customers failing to pay you

IN THE aftermath of the Covid-19 pandemic, UK businesses are feeling the pinch just as much as individuals are.

Energy prices skyrocketed in 2022, helping to push inflation above 10 per cent – a 40-year high. Supply chains have been disrupted and a tight labour market is adding to the upward pressure on wages.

For beleaguered SME owners, reviewing insurance cover might not seem like an obvious priority at a time like this. But as we explain below, the prevailing economic difficulties make it imperative.

Economic challenges

Throughout 2022, survey after survey found that many of the UK’s 5.5 million SMEs were worried about the problems they faced.

The prospect of higher inflation, reduced consumer spending and lower growth has loomed large. Even before Russia invaded Ukraine, the global demand for oil and gas was rising sharply.

In the midst of that conflict, and taking lockdowns in China into account, the UK’s manufacturing, wholesale, and retail sectors have understandably been concerned about supply chains.

At the same time, unemployment is exceptionally low and filling job vacancies is difficult. As a result, there’s little scope for lowering wages and mounting pressure to raise them.

Why the right insurance is vital

In such a gloomy environment for businesses, the risk of customers failing to pay you – perhaps because they’ve gone bust – has intensified. And since the knock-on effects could devastate your firm, it’s crucial to have reliable trade credit insurance, which covers you in the event of customer insolvencies and payment issues.

Underinsurance is another issue to consider as a matter of urgency. Given that building costs have spiralled upwards in the 2020s, the cost of rebuilding your premises could be higher than you think.

If your building is damaged and you make a claim, the final settlement could be substantially lower than you’d bargained for. In fact, it’s no exaggeration to say that the shortfall could leave you thousands of pounds out of pocket. You also need to think seriously about cyber criminals. Stories about ransomware attacks on corporations frequently make the news, but what’s less well known is that SMEs are regularly targeted too.

The scenarios outlined above –bad debts, underinsurance and cyber crime – are real and present dangers that could cost you dearly. That’s why insurance isn’t a luxury, but a necessity.

Tips on tackling costs

Shop around. Try to get a better deal from another supplier, then ask your existing one to match their prices.

Is hybrid working an option?

If employees work from home more often, you can look at reducing your office space.

If you can’t raise wages and are worried about staff looking elsewhere for work, show your appreciation with benefits such as childcare, healthcare or more holiday hours.