Markel Direct, the specialist insurer of the self-employed and small businesses, has found that over a quarter (27%) of small business owners are not confident about their business’ finances for the next 12 months.
The study, which explores how the cost of living crisis is impacting small businesses and freelancers, has highlighted both the challenges small business owners are facing in the current economic climate, as well as their resilience in responding.
With the threat of recession looming, coupled with inflation and the effects of the pandemic, the study suggests many business owners and freelancers are feeling the pinch, with 78% reporting a rise in their costs over the last 12 months.
According to the survey, the industries that were most likely to be affected by an increase in costs were recruitment and HR, public services (such as waste removal or healthcare), construction, tourism and marketing, advertising and sales. Energy (32%) and raw materials (16%) were highlighted by respondents as two areas where their businesses were seeing the sharpest cost rises.
The impact of lower consumer confidence appears to be hitting many small businesses, with 43% reporting a decline in income over the last 12 months. However, this wasn’t the case for all small businesses; 45% reported no change in income, and 12% reported an increase.
Markel Direct also asked respondents which areas of their business they were most concerned about. Rising costs to run the business was the most reported worry (21%), followed by gaining new customers / clients (19%) and retaining existing customers / clients (16%).
Additionally, late payment continues to be a challenge for small businesses, with 22% reporting an increase in late or non-payments over the last 12 months, with over a quarter (27%) of non-payments being more than £500.
Despite these challenges, the study suggests small businesses are proactively taking steps to tackle such issues. One in three increased their prices or day rates in light of increased costs, and nearly one in four (24%) are working longer hours. Only a small portion (5%) have had to take out a new loan in order to support their business over the last 12 months, suggesting their adjustments are helping to weather the cost of living storm.
Rob Rees, Divisional Director of Markel Direct, said, “The cost of living crisis is impacting all of society, and this study highlights the impact on small businesses. Many are understandably not feeling confident about the future, but despite the unprecedented challenges faced, small businesses and freelancers are showing resilience by taking action.
“These challenges make cashflow all the more important for small businesses, and the increase in late payments only adds to the challenges. As a specialist small business insurer, we understand the challenges our customers face, which is why we’re reminding our policyholders they have free access to an in-house 24-hour legal advice helpline to help handle tricky payment issues, and other legal matters they may face in the current climate.’
To further support small businesses and freelancers, Markel Direct has launched a cost of living hub which provides guidance and support across a range of areas including marketing a business, managing costs and handling late payers. Read more at the Markel Direct website.