UK small businesses are weathering the storm caused by the cost-of-living crisis and the economic fallout from Brexit and COVID-19, according to new research.
A survey of UK small business owners conducted by FreeAgent has found that, despite a myriad of challenges, many UK SMEs say they are optimistic about their future prospects, with 77% expecting their business to perform the same or better in the next 12 months.
However, the findings also highlight the scale of the problems - with business owners citing energy price rises, the lingering impact of COVID-19 and uncertainty around the UK's future outside the EU as key areas of concern.
Cost of living crisis
What is striking about this data is that the cost of living crisis seems to be affecting some small firms much more than others. The survey results show that 45% of SME owners say the crisis has had little or no impact on their business, while 45% report a negative impact.
For those feeling the crunch, 41% of firms say they have cut their marketing and advertising spend. Despite high levels of optimism about their own businesses, 45% of respondents said they believed the economy will worsen over the next 12 months, compared to just 21% who think it will perform better than the past year.
Calls for more government support
Many business owners want to see more support for small firms, with 66% of those polled saying they the UK government hasn't done enough. The findings also show that:
- 72% want lower taxes for freelancers and small businesses;
- 76% say the UK tax system should be simplified to help small businesses;
- 24% would like to see additional financial aid to help businesses through the cost of living crisis;
- 20% would like to see the abolition of VAT;
- 18% would like to see more pressure on banks to lend to small businesses.
The key areas that business owners say they will have to focus on over the coming 12 months are:
- Cash flow (43%);
- Creating new revenue streams (40%);
- Reducing overheads (29%);
- Getting paid faster (24%);
- Exploring new markets (19%).
Tackling late payments
One-third (34%) of business owners polled say they have been left waiting up to three months to get paid by a client, while 11% have waited between six and 12 months. Shockingly, 4% have waited between one and two years and 8% say they have had a client that never paid them at all.
"While it's positive news that our research shows small businesses are proving resilient to the turbulent economic conditions, it also highlights some key improvements that need to be made in order for them to thrive in the coming year. Late payment, in particular, is a real opportunity for the government to support small businesses, along with making tax simpler and helping them access much-needed funding." Roan Lavery, ceo and co-founder of FreeAgent
SME price rises "inevitable" says report
A new quarterly analysis of small business confidence by Enterprise Nation has found the number of small firms that say they must put up their prices has gone up by 11% since the last survey in 2022. Overall, 52% of businesses say they plan to put up prices. Across sectors, retail (76%), fashion (72%) and food and drink (67%) are the most likely to say they will increase prices.
Emma Jones, founder and ceo of Enterprise Nation, said: "Small businesses have been holding back since energy costs started to bite last year. Now the competing pressures of inflation, energy and staff costs have proved too much, and they have had to make the difficult decision to increase prices."
Not surprisingly, the findings also show that the cost-of-living crisis is the biggest challenge for small business owners, with 39% of businesses saying that sales have fallen due to the cost-of-living crisis.
Written by Rachel Miller.