More than four in five (81%) small business owners are worried how the cost of living crisis is affecting their business, with two thirds (65%) seeing rising costs as the biggest challenge to their business heading into 2023.
The survey of some 600 small business owners, commissioned by small business insurance provider Simply Business, has revealed the key challenges and concerns facing SME owners in the New Year, with a quarter (26%) worried they simply won’t be able to pay their bills in 2023.
Other worries include the number of sales and customers available in the New Year (43%), while one in three (31%) small business owners are worried about the uncertainty over inflation and interest rates. There is also concern around growing supply chain issues, with a fifth (22%) worried about the supply and material shortages caused by the ongoing geo-political unrest.
As a result, 15% have no confidence in their business heading into the New Year with the reality of the cost of living crisis also affecting the way that SMEs can prepare for 2023. Three in ten (28%) say they’re unable to plan or budget due to uncertainty, a tenth (10%) have been unable to order stock and three in five (60%) say their profit margins are down.
This is at a time when many are still in recovery mode. Over two years on, one in six still believe that they will never financially recover from the pandemic.
Antonia Sanchez-Toomey, Founder and Director of Tailor Made Living, a high street shop based in Enfield, comments: “2022 has without a doubt been our worst year since we started trading in 2017. We grew our business during the pandemic by making changes and increasing our retail offering both online and in-store. Sadly, this year has been full of financial challenges due to a huge drop in consumer confidence resulting in very poor sales.
“The cost of living crisis has driven the downturn in sales in 2022 with customers expressing their fears of not being able to pay their bills and actively cutting back on non-essential items. I own a lifestyle store specialising in homewares, gifting and fashion, in effect, non-essential retail and we have felt the impact of the cost of living crisis deeply. Throughout 2022 it felt like every month brought a new wave of fear and uncertainty from rising petrol prices and the war in Ukraine to the death of the Queen and more recent national strikes. The instability we are experiencing along with inflation at record highs means that consumers are understandably cutting back and afraid to spend.
“I have cut back on staff and the remaining staff have had their hours cut. I will be closing for three days a week instead of one and I have stripped all non-essential costs out of our business. I am also selling a much smaller range of goods.
We’ll be entering 2023 in poor shape, our turnover is down approximately 35% year on year, and ultimately we could be contemplating closure.”
Alan Thomas, UK CEO at Simply Business, adds: “The self-employed are feeling the pressure of the current economic climate more than most, with some small businesses not receiving the much-needed boost during the festive trading period. Our study found that four in five small business owners are worried about the impact the cost of living crisis will have on their business. This is having a clear impact on consumer purchasing behaviour, which is another blow to the pockets of small businesses. SME owners are inevitably feeling the squeeze as they struggle to pass on rising costs to their customers.
“The New Year is an opportunity for a fresh start but without support, at both governmental level and from hard-working consumers willing to shop locally, there is concern that 2023 will be even tougher.
“Small businesses account for 99% of all British businesses, contributing trillions of pounds a year to the economy in turnover. The recovery of our economy and communities is directly linked to their success. We must support small businesses all year round, and there’s no better time to start as you mean to go on in January.”
Simply Business have launched a Cost of living support hub to help support small businesses and the self-employed with free guides, templates, and resources.