6 June 2023 – Despite enormous challenges in the past few years, small UK businesses are showing resilience. Most small businesses are positive about their performance in the next 12 months.
The last few years have been tough for many small businesses. Brexit, the pandemic and the cost-of-living crisis that followed, posed many challenges for the UK’s small and medium enterprises (SMEs).
And the economic situation is still tough for many. Inflation is still high, energy costs have recently risen again, taxes and business rates have increased and borrowing money has also become more expensive again.
But despite all this, 76.6% of small businesses are positive about how they will fare in the next 12 months, according to a survey by an accounting software provider.
Small Businesses Are Positive But There Are Still Negative Impacts
FreeAgent‘s research has shown that even though small businesses expect to do better or the same in the next 12 months, they do still face some tough challenges.
The survey respondents identified three main negative influences impacting on small businesses in the UK. The lasting effects of the COVID-19 pandemic are a challenge for 15% of small businesses. Increased costs for energy were also named by 15% of SMEs.
And the uncertainty and changes caused by Brexit cause a headache for 13% of small businesses, according to the survey results.
Interestingly, the research by FreeAgent also shows that the cost-of-living crisis has not had the same impact on all small businesses. Almost half of the respondents have not seen a negative impact or only a slight one from the cost-of-living crisis on their business.
In comparison, 44.6% have said it did have a negative impact. However, most SMEs had to reduce their outgoings to mitigate the impacts of these key negative influences.
41% of businesses said they cut back their marketing and advertising budget. 31% reduced their energy use to lower their energy bills. 25% of the respondents reported that they cut back their spending on technology. This included office equipment and software subscriptions.
Last year, many SMEs were hopeful about surviving the impact of the impending recession, political instability, rising inflation and cost of living crisis – and now, 12 months on, we’re seeing the impact of these.Roan Lavery, CEO and Co-Founder of FreeAgent
Even though most small businesses are positive about their future, they have a more negative view on the performance of the UK economy. 45% expect the economy to get worse in the next 12 months. Only 21% believe it will perform better than the previous year.
Late Payments Are A Big Problem For Small Businesses
Late payments are still a huge problem for small businesses. Many are forced to seek assistance with debt collection, which incurs costs.
The lack of late payment regulations being in force means that just under a quarter of SMEs think that their business is at risk because they don’t get paid on time by their clients. While 27% wanted to take legal action to recover money from unpaid bills, they decided not to.
FreeAgent’s survey lays bare the extent of the problem. 33% of survey respondents said they had to wait up to three months for their client to pay their bill. 10% even had to wait between six and 12 months.
4% had to chase payments for one to two years, while 8% said they had a client that never paid their bill. The issue is a costly one for small UK businesses.
FreeAgent’s data shows that almost 50% of SMEs lost up to £5,000 because of late or non-payment. Projected onto all small businesses in the UK, this means in total £11.7 billion has been written off.
Unless the government is taking action to put late payment regulation into place, this is a challenge that will continue to burden small businesses.
66% Of Small Business Owners Think The Government Should Do More
The accounting software provider also asked about small businesses’ views on government support during the cost-of-living crisis. The majority (66%) said that Downing Street is not doing enough to support them. Only 9% were happy government support was sufficient.
The survey asked what measures the government should introduce to support them. An overwhelming majority (75%) of respondents said that lowering taxes for small businesses and freelancers would have the biggest impact.
Just over half (51%) want the government to crack down on tax evasion/avoidance by the big corporations. This is a drop compared to last year, when 62% named this action.
Other measures small businesses want to see from the government are more financial aid to manage the fallout from the cost-of-living crisis and the abolition of VAT.
Small businesses also think that more pressure needs to be put on banks to lend to them. This chimes in with recent reports that banks are less keen on lending to small businesses.
The majority of respondents also said that the UK tax system is too complicated and needs simplifying to help small businesses.