More than three in five (61%) small business owners think they will grow this year, but signs that many are hitting the breaks on investment in core areas, such as marketing and new technology, is raising concerns for recovery, according to a new report from Small Business Britain.
The ‘Moving Forward in 2023’ report, in partnership with Square and Clearpay, examines how the nation’s 5.5 million small businesses can thrive following years of turmoil. As the UK narrowly avoids recession, the research report found a lacklustre seasonal trading period has dented confidence and put many businesses on the backfoot.
“With a brightening economic picture, there is huge scope for turning the story around for small businesses. We need to hear more talk of growth, hope, and opportunity. This is what will inspire more optimism and fire up the nation’s 5.5 million small businesses to be the engine of growth, jobs, and innovation that the UK so badly needs,” said Michelle Ovens CBE, founder of Small Business Britain.
Over a third (36%) of small firms said the festive season was not as good as usual, but they got by, while 10% of businesses reported a poor season which left them worried about the future, and 7% found Christmas trading to be a major issue. Nearly 40% of businesses think they will either not grow, or even decline, in 2023.
In response to falling confidence, consumer demand and rising costs, almost one fifth (17%) of businesses have delayed expansion and 13% have delayed hiring. And of particular concern is news that entrepreneurs are scaling back investment in core areas such as marketing and digital skills. Almost one third (31%) of businesses have delayed marketing spend, whilst 27% have cut it, to manage cash flow. Over half (54%) of small businesses had not invested in digital skills for themselves or employees, or added any new technology in the last year.
“While the need to reduce costs is understandable, cutting activity in areas that drive revenue and growth, like marketing and digital, is counter-productive. There needs to be more support and encouragement for firms to use innovative approaches to marketing at lower or no cost. And more support and advice to help businesses find better ways to manage costs, whether that be sustainability savings, or evaluating and negotiating supply chains,” said Michelle Ovens.
Small business owner Sheena Roberts, founder, Green Man Quilts is one of the businesses with a more positive outlook for 2023. “I’m feeling quite optimistic – this recent season has been a bit of a disappointment, one of my classes had to be dropped but it gave me a chance to breathe and there’s some really exciting things on the horizon.”
Issuing a series of tips for small businesses across key areas such as ‘marketing on a budget’, ‘growing confidence’, ‘becoming more sustainable’ and ‘building resilience’, the report encourages small firms to find alternative ways to manage costs and identify fresh opportunities, particularly through the growth area of sustainability.
“We always encourage our sellers to take a savvy approach to running their businesses however the retail landscape looks. For businesses of all sizes, operating digitally will allow them to run as sustainable a business as possible which we know is a priority and should further encourage investment into technology to support this, while also levelling the playing field for SMEs” said Samina Hussain-Letch, Head of Industry Relations and Operations at Square.
“An important element that can help a small business owner’s bottom line is a payments strategy. We know that consumers want a choice of different types of payment options that offer flexibility, which in turn drives more sales. What we also see driving increased transactions is when a business has both an in-store and an online presence, that they are consistent and offer the same payments options at every opportunity,” said Rich Bayer, UK Country Manager at Clearpay.