“While today’s rate rise feels high compared to the post-2008 environment, we must remember that it is still very low by historical averages. This increase will be welcomed by inflation sensitive industries; however, to weather the forthcoming stagflation storm, not to mention trade related challenges from Brexit, chip shortages and the war in Ukraine, companies must surgically re-evaluate their supply chain to ensure they are set up for survival, let alone success.
“The challenge facing companies today is twofold: on one side input price inflation is making inventory more expensive, and inventory levels are at all-time highs. On the other hand, demand is cooling off, so costs cannot often be fully passed on and sustained high inflation is eroding the value in financial supply chains. This creates the perfect storm for companies, who are now faced with the most extreme working capital challenges seen in a generation.
“Macro-actions can help alleviate some of the pressure; however, the real challenge will be ensuring that capital is freely available where it is most needed in the supply chain. Identifying these pinch points, and ensuring capital is available will be vital in the success or failure of whole industries and their supply chains.”
Alistair Baxter, Head of Receivables Finance at Taulia