92% of SMEs say that rising costs are impacting their profitability – and 32% say it is a big problem, shows a new survey* by Moore UK, the Top 15 accountancy network.
With UK inflation having hit a 41-year high of 11.1% in mid-November, businesses are increasingly struggling against a rising tide of costs. By far the biggest problem for SMEs is the increasing cost of energy, with 55% of them saying it is the issue they are most concerned about. This ranks a long way ahead of the cost of petrol and diesel (34%) in second place.
Maureen Penfold, Chair of Moore UK, said, “With inflation still rising, SMEs are under a huge amount of pressure. The cost of energy is a major pain point for virtually every business. For some it is going to test their ability to survive.”
“The Autumn Statement didn’t provide the good news that they were looking for – it’s going to be a long winter for a lot of smaller businesses.”
Only 38% of SMEs confident in Government to deliver economic growth in 2023
Moore’s quarterly survey of owner-managed businesses shows that only 38% of SMEs are confident in the new Government’s ability to deliver economic growth in 2023. Moore’s November survey was completed after Rishi Sunak became Prime Minister.
With the UK economy sliding into recession amid political instability in the second half of 2022, many small business owners appear not to believe that the current Government will be able to return the economy to growth next year.
Penfold said, “The changes of government over recent months seem to have dented small businesses’ confidence. The majority of them don’t believe we’re going to see economic growth in 2023 under the present leadership.”
“Obviously it is early days for the new Government but as yet SMEs are not confident that growth can be delivered in the near term.”
SMEs cautious on price rises – increasing only by half level of inflation
Moore’s survey shows that owner-managed businesses have been cautious on increasing prices even as inflation continues to rise.
Only 40% of businesses polled by Moore say they have increased their prices in the last three months. Among that group the majority said that they had only increased their prices by 3-5% – less than half the current level of inflation.
In addition, only 37% of businesses surveyed are planning to raise their prices in the next three months.
Maureen Penfold said, “For a lot of smaller businesses, inflation is far more something they are experiencing than something they are contributing to.”
“Businesses are not just putting up prices in line with inflation – they are aware that their customers are already being squeezed hard.”
More than half of businesses planning to increase pay in next three months
Moore’s survey shows that 51% of businesses polled are planning on increasing pay for people in the next three months. This includes 57% of businesses who already gave out pay rises in the last three months.
Penfold added, “Recruitment and retention of people is still a key challenge for a lot of owner-managed businesses. Some are finding that they are having to raise pay repeatedly to avoid losing people.”
“While that may ease a little if the economy continues to slow, most smaller businesses aren’t seeing that yet.”
* Survey sample size: 528 owner-managed businesses. Date: November 1-6 2022