While Brexit and COVID-19 caused huge challenges for small businesses, inflation & the cost-of-living crisis are seen as much worse by 64% of small business owners.
As part of their survey, WorkLife by OpenMoney surveyed 750 decision makers for finance and HR at small and medium-sized enterprises (SMEs).
The results of the latest Small Business survey showed that almost two thirds of respondents expect that high inflation & the cost-of-living crisis will have the biggest impact on their business for long-term growth.
Followed by the effects of COVID-19, which 22% have named and Brexit, which only 11% have identified as the main factor.
Mixed Response To Challenges Of Rising Inflation & The Cost-Of-Living Crisis
The majority of respondents (37%) cited rising energy and fuel costs as the main concern in the year ahead, followed by concerns about helping employees to cope with the cost-of-living crisis, which 22% reported as the key worry.
But when it comes to managing rising costs, different firms plan different approaches. 32% of responding decision makers have said that they are planning to cut costs by looking for cheaper products and services. The same number has said they will raise prices.
However, 23% reported that they would postpone plans to invest to save money, while 12% have decided to drop plans to invest altogether.
15% said that they will stop using offices to bring down costs. And the same number plan to reduce the office space they use in an effort to cut their outgoings.
Some are also looking into their staffing costs, with 16% saying they plan to reduce staff hours. 12% said they won’t be paying bonuses and 11% feel forced to reduce their staff’s pay. 10% have said they will be unable to afford to pay salary increases because of rising running costs.
However, some businesses put the needs of their employees at the heart of their decision-making, with 16% of SMEs planning to increase salaries and benefits for their employees. And 14% plan to offer an increase in hours.
Though it’s concerning to see the threat of redundancy and pay cuts lingering for some workers, it’s encouraging to see the number of firms who have focused their response to rising inflation and bills on employee needs, rather than simply trying to cut back costs or claw back the additional outlay.Niamh McLaughlin, Managing Director at WorkLife by OpenMoney
Small Businesses Want More Support From Government
While small businesses are doing all they can to mitigate the challenges rising inflation and the cost-of-living crisis are throwing at them, they do also want the Government to do more.
The recently announced Energy Bill Support Scheme was welcomed as a short-term measure to help with rising energy costs. However, SMEs think the Government should do more to help them with the rising costs.
42% think that a VAT cut or VAT relief should be introduced. 40% want to see tax relief on employee benefits, as this would allow firms to give them more options to help their staff through the cost-of-living crisis.
36% believe that the Government should give out grants to help small businesses with the increasing costs of running a business.
Government Announced To Cut Red Tape
Meanwhile, Business Secretary Jacob Rees-Mogg has announced that the Government is planning to reduce the burden of regulations for thousands of businesses.
However, rather than making changes to the existing regulations, Mr Rees-Mogg will change the definition of small business. Now a business with up to 500 employees will be classed as a small business and will be exempt from a host of regulations and reporting requirements.
The Business Secretary claimed that this would free 40,000 businesses from tiresome regulations. But according to the Times, only around 4,000 businesses, those with 250 – 500 employees will benefit from the loosening of the reporting requirements.
And the Government will not stop there. Once they have assessed the impact of this change, they are planning to consult on increasing the threshold of what is classed as a small business to 1,000 employees.
The announcement has been criticised, with commentators saying that what is really needed is a reform of the business rates system, addressing labour shortages caused by Brexit and providing UK small businesses with easy access to the EU market.
At the same time, Liz Truss has announced that the title of Small Business Minister will be scrapped. Instead, this very important area will be one responsibility of many for a much wider ministerial role, the Minister for Enterprise and Markets.
Although the Business Department stated that small businesses are on top of the new Minister for Enterprise and Markets’ agenda, it does look like the Government does not consider small businesses as important anymore.
When the role was first created, the minister would attend Cabinet meetings. But the role was then downgraded to a more junior level. And now the title has gone.
Small businesses can be forgiven for thinking that the Government will not help them with rising inflation & the cost-of-living crisis apart from the already announced Energy Bill Support Scheme.