Businesses in the South West adapting and innovating despite challenging economic times

The Office for National Statistics (ONS) says the economy saw zero growth between October and December 2022 and while the UK managed to narrowly avoid a recession, the UK is now the only country in the G7 with an economy that is smaller than it was before the pandemic.

While many businesses are reporting challenges however, Business West’s recent Quarterly Economic Survey found that 46% of nearly 400 businesses in the South West are confident about their prospects over 2023, compared with 37% in the depths of the COVID-19 pandemic. This shows how businesses in the region are maintaining resilience and faith in their operations despite external hurdles. 

Research by McKinsey and Co found that organisations that maintained their innovation focus through the 2009 financial crisis emerged stronger and outperformed the market average by more than 30%. And forecasters at the Centre for Economics and Business Research found that the number of firms operating in 2008 fell only 0.2 per cent across the five countries studied, before growing again. They also found that SMBs (small and medium sized businesses) were vital in the economic bounce back and fuelled economic growth. They explained this was due to the SMBs ability to redirect resources and find new way of doing things. 

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Federico Uliana, Business West member and owner of Pasta Laboratory, a pasta making school in Bath, moved to new premises at the same time as energy costs surged and inflation reached record highs.

Federico said:

“We became more effective with processes in house and the way we operate in terms of conducting the classes and serving food and drinks.

“We’ve introduced a pre-booking system for our supper clubs which means we can plan exactly what we’re going to cook on the night to help keep costs down.

“We’ve also created a new course called Cook Your Creations, which involves people cooking their own pasta with us here, which allows us to cut down on waste and energy costs.

“On Mondays and Tuesdays when we’re closed, we also sublet our space to others in hospitality who are running their own supper clubs or classes.”

Business West has supported the company via the Workforce for the Future programme, and this has resulted in the company collaborating with Bath College who are now working with them to set up an internship for a young person this year.

Federico explained that the business has decided not to collaborate with resellers which advertise products on behalf of businesses, to keep costs down, and in turn this has led to them becoming more active with their own marketing.

He said: “We’ve become really creative with hosting different types of events. We’re now creating five or six different events such as quiz and singles nights to attract more people.” 

Eskimo Designs, a Bristol-based company which manufactures designer radiators faced challenges throughout 2022, and the cost-of-living crisis has led to products being developed at a lower price point. This has impacted the company’s profit margins.

However the business has continued to innovate through the crisis and has begun to develop products that appeal to a market more concerned with sustainability and efficiency. The company has recently been awarded a grant from Innovate UK to develop decarbonised heating products alongside Birmingham University. 

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Phil Ward, the company’s Managing Director, said:

“As an entrepreneur, you’re always looking for opportunities in problems. 

“We were already in the business of developing heating powered by renewable energy, but suddenly we were driven to accelerate this when the energy crisis happened. 

“It’s now much cheaper to produce electricity via wind power than gas. The whole market is in a state of flux and we’re seeing real change and a lot of impetus to develop decarbonized solutions.”

His main tip to companies during this time is to be more reactive to inflationary changes. He said:

“We have a tool called the Eskimo Price Index, which is a fictional basket of items we purchase which covers all the sides of our business. We track the prices and review it on a monthly basis. It ensures you are reacting to inflation and staying on top of fluctuations.”

Matt Griffith, Director of Policy at Business West said:

“2022 was a very tough year for local businesses, with global inflation and economic headwinds compounded by a confidence sapping period of political uncertainty in the UK. 

“The consequences are still being felt, both on business balance sheets and economic sentiment. We hope that 2023 holds more cheer, and it is a testament to business resilience that many still feel confident in their own business prospects. 

“With clear innovation and talent being seen in UK business despite the headwinds, we hope that there will be let up of pressures in the coming months.”