Small businesses hit by ‘cost of doing business crisis’

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Small businesses are being hit hard by the ‘cost of doing business crisis’ – with around one in six not fully commercial. This is according to analysis of Office for National Statistics (ONS) data by the Federation of Small Businesses (FSB), which has called on the government to provide more help to small businesses struggling with rising costs .

Around 16% of UK micro businesses – those with less than 10 employees – surveyed between April 19 and May 1 were not fully commercial. The ONS poll showed the figure was 6% for all businesses with 10 or more employees, and just 3% among those with at least 250 workers.



Around 16% of UK micro businesses surveyed said they were not fully commercial

The survey asked companies to choose from a series of statements which best described their business status, from ” ” The FSB counted the proportion that did not say they were “fully negotiating” as “were not entirely commercial.

Almost one in 10 micro-enterprises (9%) were only partially active – more than any other group – while around one in 50 (2%) had ceased operations altogether. The figures suggest the UK’s smaller businesses were struggling more than their larger counterparts even before some of the recent cost increases such as rising energy bills.

About 19% of micro-enterprises surveyed between October 4 and October 17 of last year were not running at full capacity, compared to 7% for all the others. The ONS survey also showed that, of the smaller businesses surveyed in March that were currently in business, only 12% said their turnover had increased compared to the previous month.

This was compared to 28% for all companies surveyed that employed at least 10 people.



Small businesses were more likely to say their sales had decreased
Small businesses were more likely to say their sales had decreased

The figures come as the Bank of England raised its interest rate to 1%, its highest level in more than a decade. The increase aims to reduce demand in the economy by making it more expensive to borrow and encouraging people to save, which he hopes will eventually lower the price of goods and services.

But it does mean that the cost of some loan and mortgage repayments will also rise.

Martin McTague, chairman of the FSB, said many small businesses were caught between “a rock and a hard place”, with rising costs on one side and growing debts on the other. He added: “Consider the electrician trying to manage soaring fuel prices and the costs of supply chain disruption at work, while also being hit by spiraling utility bills and, now , by higher home mortgage repayments.

“Micro enterprises are particularly affected by the crisis in the cost of doing business. Energy costs are particularly difficult to manage, as they are not eligible for the relief offered to consumers, and do not benefit from the leverage effect that large companies can exercise. As these new numbers show, their fight to bounce back from Covid is that much bigger than for many big companies.

The FSB is calling on the government to extend measures easing loan repayments for small businesses during the pandemic.

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