More than a quarter (26%) of small business owners in the UK believe that they will be forced to cease trading if the outlook for their business does not improve. In order to combat grave financial conditions, 1.48 million of the UK’s 5.5 million SMEs are considering using personal savings to prop up their business.
The SME Insights Report, published by small business insurance provider Simply Business, found that 48% of SME owners believe the rising cost of living is the most glaring challenge facing their business, with a further 63% saying that rising taxes, interest rates, and inflation are eating into profit margins.
The findings, collated using the responses of over 1,000 small business owners, shows that small businesses are caught between a rock and a hard place – being forced to increase their prices at a time when many consumers are cutting down spending. Nearly half (47%) of UK SMEs say that they intend to raise prices by up to 10%, with a further one in three (36%) increasing prices by up to 20%. The UK’s cost-of-living crisis has compelled businesses to constantly be looking for ways to stay afloat.
SME owners also cited rising energy costs and a lack of government support as the key challenges they are facing. Over a quarter (26%) of SMEs are now spending up to 40% more on energy each month compared to the previous year, with some reporting an astonishing 150% increase in their monthly energy expenses.
Annelise Sealy, owner of The Fall Bride in Hackney, east London, said, “Our building is modern spec, well-insulated, and our energy output is minimal. We don’t use any energy-intensive equipment and we run everything as efficiently as possible. And yet, over the course of the past year, our monthly bill has fluctuated between £100 and £1100 despite us doing nothing differently.
“The Government also needs to address the issue of taxation on small businesses. A blanket increase which does not consider industry, size of the business or turnover is not thoughtful or effective.”
Jonathan Portes, Senior Fellow of the Economic and Social Research Council and Professor of Economics and Public Policy at King’s College London, backed the findings in the report.
Jonathan said, “Two themes emerge from this report. First, the extent of the continued pressures on SMEs from the wider economic environment. While the energy price spike has abated, and labour shortages have eased somewhat, more generalised inflationary pressures mean that SMEs are being squeezed from both ends, with some input costs rising and consumer demand impacted as real incomes have fallen.
“Recent rises in interest rates will exacerbate both. Second, and more optimistically, the resilience of the sector despite all this; the vast majority of SMEs remain positive about their own prospects, not just for survival but for growth, and most also expect the economy to improve.
Despite the challenging economic landscape, there remains a glimmer of optimism among the small business community. Over half of the surveyed businesses (54%) expressed confidence in the UK economy’s potential for improvement within the current year. Additionally, an impressive 77 percent of respondents expressed confidence in their own business prospects for the next six months.
Alan Thomas, UK CEO at Simply Business said, “The stoic spirit of small business owners is the backbone of the UK economy – their resilience is vital to the nation’s recovery and growth. The fact that many SMEs across the UK are struggling so significantly is a serious cause for concern for the British economy and communities.
“Naturally, the impact on consumer purchasing behaviour is trickling through to the books of small business owners at a time when SMEs need our support the most. The reduced levels of cash-flow and liquidity will only make things worse for many. Small businesses sit at the heart of our communities and are vital to our economy, and it is essential that we continue to support them in these times of financial uncertainty.”