4 January 2023 – The past three years have been challenging for small businesses in the UK, so we look at what 2023 has in store for them.
A pandemic, rising inflation, supply chain issues, the war in Ukraine, soaring fuel costs and rising interest rates are just some of the many obstacles small UK businesses have had to overcome in the past three years.
The cost-of-living crisis has not only been difficult for households, but had also a big impact on small businesses’ income.
As 2022 drew to a close, several workers went on strike, including Royal Mail and railway workers. This caused challenges during a time when most small businesses expect good business.
With inflation still high as we enter 2023, it doesn’t look like the new year will be an easy ride for businesses.
Small Business Owners Fear For The Future Of Their Company
According to new research by Vodafone Business UK, one in ten small and medium enterprises (SMEs) fear that their business will not survive 2023.
Rising energy bills is the biggest concern for SMEs, with 57% of surveyed business owners and managers saying this is their biggest concern. Followed by staff wages, which are a worry for 34%.
Costs for broadband and phones are a concern for 32% and the same number is worried about rent/mortgage costs. Transport and distribution issues is a concern for 30% of business owners and managers who took part in the survey.
To keep costs down, almost half of all respondents said they turn down the heating or switch off lights. And 25% will ask staff to work from home more often.
The survey results also show that business owners are putting in more hours to keep their business going. Most have said they work on average a 46-hour week, which is 10 hours more than the average worker.
With 2023 looking like another challenging year, most expect that they will work even longer hours in the new year to ensure the survival of their business.
Whilst these findings may not be a surprise, they remind us of the many challenges small and medium businesses continue to face heading into 2023.Andrew Stevens, Head of UK Small and Medium Business at Vodafone
What SMEs Can Expect In 2023
With so many small businesses worried about what the new year brings, we had a look to see how the new year might pan out.
Energy prices have been rising since summer 2022 for businesses. Since October the Government has supported businesses with their energy bills by giving them a government-supported discount.
The Energy Bill Support Relief Scheme was due to end in March 2023, with only vulnerable sectors getting further help after this point.
But in the week before Christmas, the Government announced that the support will be extended for all businesses beyond that point. While more details were expected before Christmas, Chancellor Jeremy Hunt has delayed an announcement.
He will give more details of what support businesses will get with their energy bills from April this year onwards in the next few weeks.
Some media outlets have reported that the scheme will be extended for six months, others said there will be support until spring 2024.
It has also been reported that the subsidy on energy bills for businesses could be halved from what it is with the current scheme. So while there will be a cap on what energy suppliers can charge businesses, prices are set to rise from April this year.
Until more details have been released, millions of business owners remain in limbo, not knowing how to plan for the year ahead.
December has seen workers from several sectors walk out over pay, working conditions and terms, which has dampened Christmas trading for some small businesses.
And this year will continue as the old one ended, with a further wave of industrial action by several unions.
While there are no more strike dates confirmed for Royal Mail workers, it doesn’t look like a resolution of the dispute is close. So more strike actions could be on the cards.
However, unions of rail workers, employees at the bus operator Abellio and National Highways traffic officer have announced fresh strikes for January.
Ambulance staff and nurses, driving examiners, civil servants and teachers in Scotland will also walk out again in January.
These strikes are a sign that people continue to struggle to make ends meet during a cost-of-living crisis.
The cost-of-living crisis will continue into the new year, shrinking household budgets and consumer spending power.
Inflation remains high, and energy costs are set to rise by £900 per year on average from April for all households.
Already last year, many businesses have seen their incomes reduced as shoppers are watching their money more carefully.
Especially the retail and hospitality sectors have seen fewer customers. While the number of sales in the post-Christmas period has increased, it’s still below 2019 levels.
And the Brtish Retail Consortium (BRC) forecasts that the first six months of the new year will be challenging for small retail businesses. The trade body predicts a rise in sales of only 2.3% in the first half of the year.
However, in the second half the BRC anticipates that sales volumes will increase further.
The first half of the year is likely to be challenging for households and retailers. Ongoing inflation will make sales appear to be rising, but we expect falling volumes as consumers continue to manage their spending.Kris Hamer, Director of Insight at the BRC
Combined with various tax increases due to come in this spring, small businesses will have to face the headwind head on if they are to survive.