"The fuel crisis has highlighted the delicacy of the modern world."

Jim Shaw
Founder & CEO, Shaw & Co

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Over the last week, panic has erupted at petrol station forecourts across the country as people have put aside the ‘blitz spirit’ of the Covid-era to fill pots and pans with the fossil-fuels required to get their cars to work, to school or, in more instances than we care to admit, a mile down the road to the shops.

The fuel crisis has highlighted the delicacy of the modern world and the precariousness of its infrastructure and supply chains in an almost frightening way; if just one cog in our societal system fails then the knock-on effect is uproar and chaos.

For UK SMEs, it is yet another crack in a supply chain that was already seeing soaring freight rates and unsettling delays to shipments. It is therefore of little surprise that the crisis is subsequently having a hugely detrimental effect on the lifeblood of any business - cash flow.

Companies in various sectors were already experiencing huge cash flow problems thanks to the pandemic which were then exacerbated by Brexit. A number of manufacturing companies, for example, had actually been going through the rigmarole of setting up subsidiaries on the continent simply to mitigate the supply issues being caused by the UK leaving the EU.

"Retailers – whether it’s sports shops or toy shops – are also in a perilous position."

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Manufacturers in general are highly susceptible to problems as they have spent years minimising stock levels to improve their profitability, while supermarkets and food manufacturers are being particularly hit hard as they deal in perishable goods. Retailers – whether it’s sports shops or toy shops – are also in a perilous position as they simply can’t get product onto the shelves.

Even if the product is available, a lot of debt-laden companies are facing bankruptcy simply because they can’t get further funding to build up the necessary stock reserves with which to insulate themselves from supply chain volatility. Funding stock is notoriously challenging. Even if they do have the cash flow then there are other factors at play. I know of one UK manufacturer who ordered £100,000 of timber from Scandinavia for his furniture business. He got the deal done, the timber was on the boat, but he was gazumped by an American company while the cargo was at sea. The supplier had been offered 60% more for the product so they reimbursed him and the boat simply trundled on to the States. Add inflation into all this and you have a perfect storm for SMEs.”

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