1.4 million businesses facing closure due to economic challenges

Small businesses in the UK are grappling with what can be described as a 'quadruple threat,' which includes the ominous combination of rising interest rates, surging energy costs, delayed customer payments, and the financial burden of meeting sustainability expectations.

This confluence of challenges has left more than a quarter of small business owners contemplating the possibility of shutting down their operations if their business outlook doesn't improve by the close of 2023.

Should this trend persist, it could potentially result in the closure of approximately 1.4 million small businesses across the UK, which would have far-reaching and devastating repercussions for British high streets, local communities, and the overall economy.

These alarming findings emerge from the SME Insights Report, recently released by small business insurance provider Simply Business. The report highlights that over 50% of SME owners are grappling with the adverse impacts of escalating taxes, interest rates, and inflation, which are significantly eroding their profit margins. To compound these financial woes, many entrepreneurs are engaged in a relentless battle to recoup thousands of pounds in unpaid invoices.

For the first time this year, the issue of late payments has emerged as a prominent concern. Research reveals that British small businesses are collectively owed a staggering £32.1 billion in overdue payments from customers.

Another distressing revelation is that one in four SME owners have been compelled to dip into their personal savings to sustain their businesses, while nearly a third have had to resort to bank loans to stay afloat.

Moreover, the sustained surge in energy costs is raising questions about its long-term ramifications. More than 25% of SMEs are now witnessing a monthly energy expenditure increase of up to 40% compared to the previous year, with some reporting an astonishing 150% spike in their monthly energy bills.

Despite the dedication of over three-quarters of UK small business owners to integrating sustainability into their business strategies, their noble efforts are being hamstrung by the financial burden associated with adopting environmentally friendly practices.

Alan Thomas, the UK CEO at Simply Business, expressed deep concern about the situation, stating, “The stoic spirit of small business owners is the backbone of the UK economy – their resilience is vital to the nation’s recovery and growth. The fact that many SMEs across the UK are struggling so significantly is a serious cause for concern for the British economy and communities.

“Naturally, the impact on consumer purchasing behaviour is trickling through to the books of small business owners at a time when SMEs need our support the most. The reduced levels of cash-flow and liquidity will only make things worse for many. Small businesses sit at the heart of our communities and are vital to our economy, and it is essential that we continue to support them in these times of financial uncertainty.”

Article by Business Matters Magazine