Excitement may be ramping up due to reduced social restrictions this week, but the long-term impact of COVID is the biggest worry for small business owners for the months ahead. New research from Hitachi Capital Business Finance reveals that entrepreneurs are almost twice as likely to cite the legacy of COVID as a risk to business growth than the long-term economic impact of Brexit (47% Vs 27%).
The new research suggests that even though the nation will meet the ending of social restrictions with excitement and optimism, many small business owners remain alert to potential economic disruption that may still lie ahead. Whilst the percentage of small enterprises predicting growth has hit a two-year high, the Hitachi Capital survey of 1,306 small business owners found that 78% of enterprises were keeping a close eye on the risks that could holding back growth plans.
Overall, the top concerns for small business owners are dominated by three macro-economic factors – principally, the direct impact of COVID on their operations (47%), general market uncertainty (39%) and the economic impact of Brexit on their business (27%).
This represents a marked shift from the year before COVID where – aside from general market uncertainty (31%) – the top worries for business owners related to more specific issues within in their operational control, such as: red tape (20%), taxation & pensions (21%), volatile cash flow (17%), rents/rates (15%) and the cost of skilled labour (15%).
Who is most worried most about COVID?
Smaller companies in hospitality/leisure (70%), retail (58%), education (58%) and medical services (49%) were most likely to be concerned about COVID having a long tail in terms of economic impact. The findings for the retail and hospitality sectors were of particular note because these were also sectors where a significant rise in growth forecasts were recorded for the current quarter. This suggests that whilst these sectors hope to bounce back after a troubled lockdown, confidence is in fact fragile – with many business owners acutely aware of how further COVID developments could destabilise their enterprises.
Regionally, small businesses in the North East (57%) and the East Midlands (52%) were those most concerned about the legacy of COVID continuing to adversely impact their business operations.
Who is most worried about Brexit?
Small business owners in Wales (33%) and Scotland (32%) were those most concerned about the economic impact of Brexit on their business – places where worries about the commercial impact of COVID were significantly lower (42% and 43% respectively).
Beyond concerns over the lingering impact of COVID and Brexit, other factors listed by UK small businesses as threats to growth included: red tape (12%), volatile cash flow (11%), high fixed costs and overheads (10%) and the cost of skilled labour (8%).
Joanna Morris, Head of Insight at Hitachi Capital Business Finance comments: “Whilst we all look forward to a summer of optimism, our survey shows that many business owners are conscious that there would still be long-term implications from both the pandemic and Brexit. After repeated lockdowns in the last year, small business owners are being pragmatic. There is a record quarter-on-quarter upturn in the proportion of small businesses predicting growth, but this is not blind optimism: Business owners have their eyes wide open to the risks that lie ahead and, in today’s market, this has become an essential part of robust business planning.”