Inflation already affects Canarian companies: 60% are seeing their growth limited

Image of companies in the Arinaga Industrial Estate. The rise in costs is beginning to take its toll on the companies on the islands, which are slowing down their growth. / ARCADIO SUAREZ

Seven out of ten companies are unable to meet their workers' demand for wage increases. At the national level, the rate is 20 points lower

CANARY ISLANDS7 The Gran Canarian palms.

In a context in which a large number of companies have not yet recovered from the ravages of the health crisis, a
new challenge that threatens its viability and cash flow: inflation.

According to the new edition of , presented this week at an international level,
58% of companies of the Canary Islands recognizes that this problem is limiting its ability to grow the business and take advantage of new opportunities. Nationally, this percentage drops to 55%.

As this study indicates,
analyzes financial health and economic forecasts of the companies in 29 countries throughout Europe -including Spain-, the main reason for this statement is that 6 out of 10 do not have the necessary experience and capacity to correctly manage the impact of inflation on their companies.

Canary Islands, below the European average

In Spain, the figure is 51%, which places our country in a prominent position in Europe, as it is the second country with fewer organizations without experience and the capacity to face the business consequences of price increases.

Specifically, we would be only below Germany (49%) and seven points better than the European average (58%) and other markets such as Italy (60%), France (57%) and the United Kingdom (54%).

The entities that claim to have less capacity to face inflation in their businesses are the Greek (68%), the Estonian (67%) and the Swiss (66%).

With inflation, many companies are seeing their
profit margin by the loss of customers due to the increase in the price of its own products, or by the increase in its business costs.

Salary increases, difficult to assume

A situation that, in turn, affects two of its main value assets: employees and suppliers. According to the Intrum report,
73% of Canarian organizations (54% in Spain) recognize that they do not have the capacity to meet the demand for salary increases of its workers in view of the high inflation rate. In addition, 75% place this problem as the main reason for, at times, having had a hard time paying their suppliers on time.

This percentage, which at a national level is 61%, would explain why 71% of the companies in the Canary Islands indicate that they have received the request to accept longer payment terms. A figure that in the country as a whole amounts to 76%.

"Inflation will have a direct impact on the ability of companies to meet their payments on time, and therefore the
increase in delinquency, which represents a real risk for the growth of the business network. This represents an enormous challenge for companies that will have to establish, among other measures, mechanisms to reduce the payment periods of their clients", affirms José Luis Bellosta, general director of Intrum in Spain.

The rise in rates, an added problem

Along with the rise in inflation, another major concern for Spanish companies is the
rise in interest rateswhich could make companies and individuals in a more vulnerable situation experience greater difficulties in paying their debts and, as a result, see their level of spending limited.

A situation that the Canarian companies consulted by Intrum are also aware of, since, according to this new edition of the European Payments Report 2022, more than 5 out of 10 companies (54% in the community and 58% nationally) are convinced that the
interest rates will increase, which is leading them to be more cautious with their investment and spending plans.

Spanish companies are situated in this aspect one point above the European average (59%), and in line with other economies such as Italy (58%). For their part, French and Austrian companies (65%) are the most cautious regarding their investment and spending plans in the face of rising interest rates, while German (55%) and Greek (52%) companies ) are more confident.

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