Raw Material Shortages: Growing Problem for SMEs

Shortage of raw materials has closely caught up with labor shortages among the factors hindering the operation of firms, with 26% of small and medium-sized enterprises (SMEs) struggling with the former and 33% with the latter in the first three months of this year, according to the first quarterly results of the K&H SME Confidence Index.

The survey polled business decision-makers from 400 Hungary-based companies with annual sales of less than HUF two billion. The survey looked at the ten economic factors that most influence the economic situation of companies, including customer and supplier relations, the workforce and the company's finances.

In the press release about the survey, Zoltán Rammacher, Head of SME Marketing and Sales Support at K&H Bank, said that the increasing problem of sourcing raw materials is a clear trend for SMEs. Meanwhile, labor shortages are one of the main obstacles for companies, with five percentage points less firms facing problems. If the trend continues, shortages of materials could become a more serious constraint than labor shortages by the second half of the year," he added.

The survey results also showed that the third most challenging factor is exchange rate fluctuations, which already affect 24% of respondents, compared to two percentage points less in the last quarter of 2021.

They said that supply chain issues had almost tripled the proportion of businesses struggling by the fourth quarter of 2020. As supply problems have not eased, the figure has also doubled in another year. The protraction of the Russian-Ukrainian conflict and the economic measures associated with it could exacerbate this trend. 

In the distributive trades, 42% of firms are facing product shortages, and in industry and construction, 40% of firms. These two sectors work with a large number of raw materials and finished products, which is why supply chain problems are the biggest problem for them. The share of SMEs with supply chain problems is 16% in agriculture and 12% in services.