A new study has shown small businesses are reluctant to hire new staff in the coming 12 months.
New data by small business lender iwoca has shown what small businesses are worried about in 2022. The biggest worry by far is rising inflation, with 71% of small businesses citing this as their main concern.
Inflation is predicted to reach 6% in the next 6 months. So, no wonder small business owners are careful and expect not to hire new staff in 2022.
These results show that small business owners are concerned about rising inflation and the subsequent knock-on effect this will bring.Seema Desai, Chief Operating Officer at iwoca
What Else Small Businesses Are Concerned About For The Year Ahead
While rising inflation is the biggest worry for small businesses looking ahead, iwoca’s analysis has shown, there are other factors that cause major concerns.
As a consequence of rising inflation, interest rates are also on the rise, and further hikes are possible, according to the Bank of England. The Bank of England has increased the base rate from 0.01% to 0.25% at the end of 2021, and further increases might be necessary in 2022.
This will put more financial pressure on small businesses who have already had a difficult past year.
Increased running costs are also a concern, with 46% of small businesses being worried about the impact this will have on their business in 2022. Rises in prices for energy, fuel and raw materials are the most worrying for businesses.
Unlike homeowners, businesses are not protected by Ofgem’s domestic consumer price cap. This means that energy prices for them can rise unhindered, increasing running costs considerably. It’s not surprising that this causes concerns for so many small businesses.
Rising interest rates are also a concern for businesses, because this could slow down the recovery of the economy. According to a survey by the British Chambers of Commerce, one in four of the businesses asked are worried about the rise in interest rates.
The Pandemic Is Still A Big Cause For Concern
The pandemic remains a concern for small business owners in 2022, with 66% naming potential Covid-19 restrictions returning as a key concern. Already last year, the difficult trading conditions the restrictions have caused, have had a devastating impact on many businesses.
The new Omicron variant has increased cases, which has a big impact on the workforce. 24% of small businesses have named staff illnesses as a major concern for their business in 2022.
The emergence of the Omicron variant has shown how volatile the situation is and how quickly any gains made from the successful vaccination programme in the UK can be destroyed. To hire new staff in such an uncertain situation seems too big of a risk for many small businesses.
The political uncertainty is also a cause for concern for small businesses, with 43% naming this a key concern about the economy in 2022.
Interrupted supply chains caused by Brexit and the pandemic were a big concern last year and 25% of small businesses fear these interruptions will continue to cause problems for their businesses.
Over the last few months, supply chain issues and rising costs have meant we have had to remove certain meats from our menus including beef and lamb.Harp Gill, Owner of Mobile Catering Business The Rub
Why This Impacts On Small Businesses Reluctance To Hire New Staff
All these factors have led to a rise in pessimism amongst small business owners. So it is no surprise that their confidence has decreased.
30% of small businesses believe that they face an uphill battle in 2022 and, as a result, expect their prospects to be worse by the end of the year.
It says a lot about the state of a country’s economy, when only 28% of small businesses are optimistic that their business will grow this year. One in five small businesses actually think that their turnover will decrease over this year.
Small businesses struggle with cash flow, which makes them more vulnerable to the impact of new variants, reintroduction of restrictions, rising inflation and increases in interest rates.
This pessimistic outlook on the future of their businesses and the worries and concerns about the economy, has a direct impact on the hiring attitude of small businesses. With a staggering four out of five small businesses predicting that they won’t hire new staff in 2022.