Some feedback from Simply Business on the challenges facing small companies and sole traders;

National Insurance increases, reduced business rates relief and a stubborn inflation rate. The first change of UK government in 14 years has seen the UK’s 5.5 million small businesses face mounting financial pressure. A new report published by leading small business insurance provider, Simply Business, is revealing the lasting effects of rising prices and fluctuating consumer demand on this essential sector. 

Accounting for 60% of all private sector employment and providing £2.8 trillion in turnover each year, SMEs are vital to the UKs economic success. Yet one in five (18%) fear they could be forced to close permanently if conditions don’t improve – that would mean almost one million fewer businesses in the UK. A quarter (25%) say they will need to use their personal savings to prop up their business.

Surveying over 2,000 small businesses, Simply Business’ new SME Insights Report delves into the challenges facing Britain’s SME community and reveals the support they are calling for to help them thrive.

High expectations

In a survey from the insurance provider prior to the election, it was clear that many small business owners were hopeful for the support a new government could provide. In fact, 81% said they would or would consider voting for a party if they placed more importance on the needs of SMEs. And putting words into practical action remained key as 25% said reducing the tax burden should have been the main priority for an incoming government when it comes to supporting them.

As for the support they need now? 27% agree the government should simplify the tax process and a quarter (24%) say they should reverse the employer’s National Insurance increase.

Falling Confidence

12 months on from the introduction of a new government, SMEs are less confident in the UK economy. In 2023, just over a quarter thought the economy would worsen over the course of the year, but this has now increased to 50 per cent. 

Rising Prices

With the rising costs of running a business affecting half of small businesses, many are facing difficult decisions. 43% say they will need to raise their prices as a result of rising taxes and minimum wage, with one in five (19%) raising them by as much as 29% in order to offset costs.

Yet for many, they are expecting a decrease in profits despite an increase in prices. In 2023, 43% of small business owners expected an increase in profits, this has now dropped to 17%.

Hope for the Future

But SMEs remain hopeful for the future. 57% are confident about their prospects over the next 12 months. Although, a quarter (25%) say they will have to use personal savings to prop up their business if the remainder of 2025 is unsuccessful.

Amanda Burwell, owner of Ollie Burwell, ladies online resort wear clothing business:

“I have been running Ollie Burwell, a ladies online resort wear company, for over 15 years. The last 12 months have been hard as customers are spending less money on non essentials.

“Costs just keep escalating. With minimum wage recently raised and N.I. payments now starting from earnings at £5,000, alongside the huge escalation in the cost of electricity, it’s practically impossible to make any profit any more.

“Small businesses are where the big businesses started. If the government is serious about reversing the turn around of the high street, they need to prevent parking charges from being so high. They could also stop corporation tax on small businesses turning over under £100,000 and put N.I. back up to starting from earnings of £10,000 a year plus.”

Photo; Pexels. Finding office or Commercial space that’s affordable and secure in terms of data, equipment, staff etc is also a challenge.

Adam Billiald, owner of Embracing Nature Ltd: 

“I started my business, Embracing Nature Ltd in 2021, manufacturing a wide range of natural, cruelty free products for pets, homes and gardens with everything proudly made in the UK.

The last year has been as challenging as ever – but it has represented an opportunity to analyse costs and identify where to increase operating efficiencies.Consumer confidence has noticeably been impacted by the cost of living and consumers are more focussed on getting great value for money than ever before.

“The best support the government could give to small businesses like mine would be to reduce the burden of taxation. Moving corporation tax from 19% to 25% in 2023 was yet another blow to UK enterprise – causing many businesses to fail. It is also making it increasingly difficult for many existing small businesses to survive and turn a profit at year end.”

Simply Business UK CEO, Julie Fisher said:

“The first change of UK government in 14 years has seen running costs rise for small businesses, with changes to tax, business rates relief and minimum wage. Set against a background of sustained economic uncertainty – many small business owners have felt the need to react as our research reveals three quarters (74 per cent) plan to increase prices in the next 12 months.

“Yet, in a show of optimism that is so characteristic of this sector, SMEs remain hopeful. As we look ahead, over half of businesses remain confident about their future prospects. But for those that have an unsuccessful year, one in 10 could be forced to let staff go, while almost a fifth (18 per cent) may have to cease trading permanently.

“Seeing so many SMEs across the UK struggling is a serious cause for concern, not just for the founders of these businesses but for the British economy and our wider communities. We must do everything we can to protect, support, and celebrate their spirit and resilience.”

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