Small businesses tell government: ‘We won’t survive’

small businesses fear the UK economy will never recover

Small businesses tell government: ‘We won’t survive’

Millions of small businesses fear the UK economy will never recover from the effects of Brexit and the Covid-19 pandemic.

A staggering 3.5 million SMEs are worried they won’t survive even the next 12 months.

Around one-quarter of Britain’s 5.5 million small and medium enterprises claim the economy is damaged irreversibly – and the current climate of financial uncertainty is doing nothing to alleviate their fears.

Effects of the cost of living crisis

Since the cost of living crisis first gripped the UK economy early in 2022, business owners and employees alike have felt the impact.

Owners have had to tighten the purse strings – and the cost-cutting has been passed on to employees. One-quarter of SMEs in the UK have reported being forced to reduce staff benefits as a result of money being tight.

Few can see a light at the end of the tunnel, as 35% of SMEs and independent accountants handling small business accounting believe the gloomy economic climate will hamper any fiscal growth.

Almost half of small business owners say they are about the same, or even worse off since Rishi Sunak became Prime Minister on 25th October 2022. His appointment has done little to calm the markets since his predecessor, Liz Truss, stepped down after a chaotic seven weeks in office.

Sunak’s appointment as PM has created slightly more confidence among SMEs, with 20% believing there is a greater chance of survival now he is leading the country, compared with Truss.

Around 50% of accountants feel the UK’s current economic pressures will take between three and five years to ease. This is up from 38% compared with when Truss was at the helm.

How are businesses surviving?

Business owners grappling with the economic downturn are struggling to retain employees. Around one-quarter have had to impose a recruitment freeze to save money, as well as reduce staff benefits.

In addition, 25% of SMEs have had to halt training programmes. They are cutting employee benefits rather than reducing spending on technology because tech has become so important to modern businesses.

SMEs are calling on the government to extend the energy cap for businesses and introduce new government loans to enable them to pay energy bills – the biggest hurdle for most businesses.

The government’s Making Tax Digital initiative, aimed at helping businesses to keep on top of their financial affairs, is generally viewed as a positive step.

What does the future hold for small businesses?

Studies show millions of SMEs across Britain are simply aiming to survive and have no viable growth plans on the horizon. There’s also little chance of many new businesses starting up in the foreseeable future.

The average cost of starting a new online-only small business is around £30,000 in the first year. The criteria for being a small business is having between one and four employees, according to the survey by Shopify. The costs include buying stock, staff salaries, shipping, marketing, and incidentals.

There is a range of small business start-up support available in the UK. Details of 38 regional Growth Hubs are laid out on the Local Enterprise Partnerships Network website.

Between January and March 2022, there were 205,171 new businesses launched in the UK – but at the same time, 150,810 existing companies folded.

If you are a small business we have free downloadable resources and more information about small business support on our website, alternatively contact us to see how we can support you with your financial worries.

Sources:

gov.uk

swoopfunding.com

fool.com

onrec.com

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