Over half (54 percent) of small business owners say rising fuel and energy costs are one of their greatest threats to survival, states a recent research, highlighting how the issue is believed to be one of the greatest threats to small and medium enterprises (SME) survival in 2022.
According to SME Insights Report based on the survey of over 1,000 UK small businesses, most (70 percent) of SME owners say that rising costs across the board are their biggest challenge this year while three in five (59 percent) small business owners are calling on the government to review or reduce the energy price cap.
A fifth (21 percent) states the VAT cut needs to be reviewed or extendedalso found that one third (36 percent) stated tax and national insurance hikes are their greatest concern, states the report.
Half (49 percent) said that they are set to increase their prices in an attempt to offset increased expenditure. One in five (21 percent) intend to raise prices by 6-10 percent, and for almost one in 10 owners (7 percent), these increases could be as much as 20 percent.
While the energy price caps do not apply to businesses directly, millions of small business owners are still experiencing increased energy bills at a time when costs are rising in most operational areas. At the same time, with a substantial number of households affected by rising energy bills, consumer purchasing power is going down as people cut back on non-essential spending.
Looking at wider challenges, the report also found that a fifth (22 percent) of SMEs state a lack of funds or access to credit could lead to closure this year.
Three in five (62 percent) owners believe that the economy is set to worsen over the next six months. Despite this, many SME owners remain confident in their business’ ability to weather the storm, states the report.
Commenting on the findings, Jonathan Portes, Professor of Economics and Public Policy at King's College London, said that UK conditions have been aggravated by both Brexit and the recent fall in the pound, which further pushes up energy prices, as well as by the operation of the energy market and the price cap.
“Nor does the disconnect between the Prime Minister’s call for a “high wage, high productivity” economy and the insistence that workers have to accept large cuts in real wages help to improve consumer and business confidence. While UK businesses remain resilient in the face of further economic turmoil, they need and deserve a more coherent longer-term strategy for the UK economy,” Portes said.
Alan Thomas, UK CEO at Simply Business, said that many small business owners are at breaking point – feeling the crippling pressure of rising costs, energy and fuel prices, alongside their ongoing recovery from the economic impact of the pandemic.
“Our SME Insights Report is a clear indication that small business owners want and need government support, with three in five calling for a review or reduction of the energy price cap.
“In the meantime, whilst the energy price caps do not apply to businesses, owners are seeing their energy bills increase overall. The surging cost of fuel and energy, alongside the overall rising cost of living, will understandably see households cut back on non-essential spending. There is a domino effect in place. The impact to consumer purchasing behaviour will trickle through to the books of small business owners, at a time when SMEs need our support the most.
“Accounting for over 99% of all UK businesses and contributing trillions of pounds in turnover every year, small businesses sit at the heart of our communities and are vital to our economy. And while it’s encouraging that the majority remain optimistic about their businesses chances, it’s clear that owners need support to weather the pressure of rising costs.”
