The Gallagher Business Risk Index asked 1,000 leaders at UK businesses to identify the top risks affecting their firm. The rising cost of materials came first, identified as the biggest concern by nearly one in five businesses (19% - see table 1). This is almost twice as many who said it was a leading risk pre-pandemic (11%).
The energy crisis is a major factor driving up the cost of materials, with 41% of affected businesses suggesting it has had a significant impact. This is because materials have become more expensive to refine and manufacture, with costs being passed on to buyers. Other key factors influencing the rising cost of materials include inflation (cited by 41% of affected businesses), which is raising prices across the board, while the impact of the pandemic (40%) is still playing a significant part.
As well as cost, the availability of materials is a major concern for UK businesses, as supply chain issues rank as a leading issue for 15% of companies. Scarcity and disruption are likely to drive costs up further, making it harder to meet customer need.
Key reasons given by businesses for supply chain issues include ongoing complications due to Brexit (named a factor by 42% of those affected) plus the legacy of COVID-19 (42%) and the impact on the ability of goods and services to cross borders. Meanwhile, new challenges such as the increasing cost of fuel (31%) and the Russia-Ukraine conflict (30%) mean problems are further exacerbated.
Top 10 risks identified by UK businesses in 2022
| Rank | Risk | % of businesses identifying among top three risks* |
| 1 | Cost of materials | 19% |
| 2 | Employee retention | 17% |
| 3 | Cash-flow | 16% |
| 4 | Cost of salaries | 16% |
| 5 | Competition within sector | 15% |
| 6 | Supply chain failures | 15% |
| 7 | Cyber-crime | 15% |
| 8 | Lack of skilled talent | 13% |
| 9 | Data breaches | 13% |
| 10 | Cost of transportation | 11% |
Table 2: Top 10 risks identified by UK businesses – pre-pandemic
| Rank | Risk | % of businesses identifying among top three risks* |
| 1 | Competition within sector | 16% |
| 2 | Employee retention | 14% |
| 3 | Cyber-crime | 13% |
| 4 | Lack of skilled talent | 12% |
| 5 | Cash-flow | 12% |
| 6 | Cost of salaries | 12% |
| 7 | Cost of materials | 11% |
| 8 | Data breaches | 10% |
| 9 | Late payments owed to my business | 10% |
| 10 | Supply chain failures | 8% |
Commenting on the findings, Neil Hodgson, Managing Director of Risk Management at Gallagher, said: “Inflation and the rising cost of energy and fuel are major factors influencing our risk index, particularly the cost of materials, plus with the supply chain issues we have experienced in the UK over the last year a knock-on impact on costs, and as with other risks, this is exacerbating the impact of Brexit and the pandemic. These problems unfortunately see no sign of abating and businesses need to prepare for these issues over the longer term.
“Businesses should speak to a risk management specialist to help them mitigate the impact of risks to their business and become more resilient to issues arising as a result of the tricky economic environment. As well as taking preventative steps though risk management, businesses can also insure against the impact of factors such as supply chain delays, cyber-crime and business interruption.”
