UK businesses continue to expect to raise prices and offer wage increases, signaling that domestic inflationary pressures are likely to persist, according to a survey published on Friday. The Lloyds Business Barometer survey also revealed an optimistic outlook among businesses for the coming months, despite the ongoing economic challenges.
Lloyds Banking Group PLC (LON:LLOY), a major UK banking entity with 95% of its assets based domestically, has been closely monitoring these inflationary trends. The bank has emerged as a low-risk domestic retail and commercial bank since its massive restructuring, which began in 2011. According to real-time metrics provided by InvestingPro, Lloyds has a market capitalization of 34037.8M USD and a P/E ratio of 5.49, indicating a low earnings multiple. InvestingPro data also shows that Lloyds has been performing well with a revenue growth of 14.99% and a dividend growth of 26.0%.
The survey's findings coincide with the continued improvement in the position of UK households. They contrast with the broader global economic landscape where high inflation continues to exert pressure. In the U.S., for example, the rate of inflation remains at 5%, well above the Federal Reserve's 2% target. This is due to various factors including ongoing supply chain disruptions, the Russia-Ukraine war, and the lingering effects of COVID-19 stimulus spending.
High inflation rates have complicated business operations by increasing costs for raw materials, distribution, payroll, and other operational expenses. As a result, it has become more challenging for companies to remain competitive and profitable. This is in line with one of the InvestingPro Tips which notes that Lloyds suffers from weak gross profit margins.
Inflation has also added complexity to accounting and finance teams' tasks. It can distort a company's financial performance and overall health. For instance, high inflation can cause market values to fluctuate, making it more difficult for accountants to assess inventory assets accurately. It also requires finance professionals to adjust their strategies and be more conservative in decision-making during periods of high inflation.
Moreover, high inflation can pose risks to employee well-being and retention, especially in corporate accounting and finance roles. These roles often involve complex, demanding and fast-paced work that can lead to workforce burnout and high attrition rates. A recent survey showed that 88% of accountants desire a better work-life balance, while 71% expressed the need for employer-driven mental health services.
The current high-inflation environment has exacerbated a pre-existing shortage of accounting and finance professionals. Between 2020 and 2022, more than 300,000 accountants and auditors quit their jobs. Despite this lack of trained talent, jobs in these fields are projected to grow steadily, with accountant and auditor jobs expected to increase by 6%, and financial manager positions by 17% between 2021 and 2031.
To navigate this challenging economic landscape, industry professionals are turning to inflation accounting strategies to increase accuracy in financial analysis and reporting. Companies are also prioritizing employee satisfaction and retention strategies to ward off attrition. Also, as per InvestingPro Tips, Lloyds has been profitable over the last twelve months and analysts predict the company will continue to be profitable this year. This, combined with the bank's strategy of raising its dividend for 3 consecutive years, suggests Lloyds is well-positioned to navigate the current economic challenges. For more insights like these, check out the additional tips offered by InvestingPro.
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