Small businesses are quietly absorbing costs for customers – but it can’t last |
It’s become clear that small businesses are bearing the brunt as their costs spiral out of control. Will the government and policymakers take note?
Listen to this article
On Tuesday, Chancellor Rachel Reeves told the Commons that "stability is the single most important pre-condition for economic growth." For many of the UK’s 5.7 million small businesses, that stability still feels out of reach.
The OBR numbers tell the story. Growth has been downgraded to just 1.1% this year and inflation is still biting. With Employer National Insurance contributions having risen, business rates relief being cut, and Making Tax Digital looming, pressure is coming from all sides for the SME sector - the group which employs over half of the UK private sector.
Yet behind that pressure, our new research reveals a story of quiet resilience. Operating costs have surged for 82% of small business owners over the past 12 months. However, only 12% have chosen to raise prices in line with their increased costs. This decision to keep customers happy, to protect contracts, and stay competitive is understandable. But it’s not sustainable.
These challenges aren’t just taking a financial toll. Worryingly, nearly half (49%) of SMEs say that financial pressures are impacting their mental health.
There’s also a sense of continued uncertainty with over two thirds (65%) saying the frequency of policy changes is undermining their ability to plan long-term.
And we’re not going to see the growth that the UK economy so vitally needs when businesses continue to feel unable to plan further out than the next government budget or statement.
With geopolitical instability adding a new inflationary risk to an already strained environment, the cost of inaction is only growing.
Yet small businesses have not lost their ambition. With unemployment set to hit 5.3% this year, businesses told us that if the tax burden were reduced, 26% would expand, 18% would hire, and 41% would invest in their business for the future. That ambition deserves to be met.
What gives me hope is that the overwhelming majority of small business owners still feel passionate about what they do. Our research shows 86% of them love running their own business – but we can’t take advantage of this. Silence isn't stability.
The nation's small businesses and self-employed deserve better conditions for growth. Create those conditions, and we will all feel the benefit.
______________________
Julie Fisher is the UK Chief Executive Officer of Simply Business, one of the UK’s biggest business insurance providers.
LBC Opinion provides a platform for diverse opinions on current affairs and matters of public interest.
The views expressed are those of the authors and do not necessarily reflect the official LBC position.
To contact us email opinion@lbc.co.uk