How will the war in Ukraine affect small businesses?

Russia’s invasion in Ukraine has sent shockwaves throughout the world, and its impact on the Ukrainian people has been devastating. But with inflated energy prices set to climb even higher as European countries wean themselves off Russian oil and gas, small businesses in the UK are beginning to feel the ripples closer to home. Here, we look at some of the impacts and what they mean for businesses.

May contribute to soaring energy prices

Wholesale energy prices have already risen considerably due to greater demand, but now, the war in Ukraine threatens to send prices even higher. This is because Russia is a prominent supplier of energy to Europe, contributing around 40% of the continent’s gas.

The UK is less reliant on Russia’s oil and gas (about 6% of our oil and 4% of our gas comes from Russia), but any uncertainty over Russian supply will push prices up across the whole market. Though the Prime Minister is keen to wean the UK off Russian supply,  this will take some time, and with prices already high it seems likely they’ll continue to climb until the conflict is resolved.

Supply chains are expected to be disrupted

The other major impact of the war is the effect on supply chains. While it’s obvious to see how this will affect supplies coming out of Ukraine, like wheat and iron ore, it’s also likely to cause supply chain cost inflation on imports from Russia.

As Russia is the world’s largest exporter of natural gas, CO2 supplies are likely to be affected, as will other commodities such as palladium, platinum, gold and aluminium, which could cause delays in the UK manufacturing industry. Titanium, nickel, cobalt and lithium supplies could also be affected, as Russia is a major producer of these metals, which are used in the aerospace, automotive and electronics industries.

In addition, Russia also produces two-thirds of the world’s supply of ammonium nitrate fertiliser, which means the conflict may affect supplies and have a knock on effect on the UK’s food production.

Employees with ties to Ukraine may need extra support

If your business has any employees based in Ukraine or with ties to Ukraine, you’ll want to offer them some extra support during this difficult time.

You may want to remind your managers and employees of what guidance and services they can access through their workplace, such as your Employee Assistance Programmes (EAPs) or bereavement counselling. You can also look to adjust your working policies, such as deadlines, working hours and mobile phone or contact policies, and be flexible with unpaid, sickness and paid special leave, to provide support to those that need it. 

Businesses face reputational risks associated with working with Russian companies

For businesses that work with Russian companies, the conflict also brings a range of reputational risks to consider. Continuing to work with Russian companies could lead to backlash from consumers and clients, so UK businesses should think carefully about the goods and services they receive from Russian businesses, and whether they can get these from elsewhere.

The Business and Humans Right Resource Centre has issued guidance to help businesses decide how to best handle these issues, and you can check that out here. If your business sells goods or services to Russia or Ukraine and you’d like some advice, you can contact the Government’s export support team here.

25/03/22: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.