Small firms are being hit hard by the “cost of doing business crisis” – with around one in six not fully trading. That’s according to analysis of Office for National Statistics (ONS) data by the Federation of Small Businesses (FSB), which has called for the Government to provide more help for smaller companies struggling with rising costs.
Around 16% of UK micro-businesses – those with fewer than 10 employees – surveyed between April 19 and May 1 were not fully trading. The poll by the ONS showed the figure was 6% for all businesses with 10 or more employees, and just 3% among those with at least 250 workers.
The survey asked firms to choose which of a range of statements best described their trading status, from “currently fully trading”, “currently partially trading”, “paused trading”, and “permanently ceased trading”. The FSB counted the proportion that didn’t say they were “fully trading” as “not fully trading”.
Nearly one in 10 micro-businesses (9%) were only partially trading – more than any other group – while around one in 50 (2%) had stopped altogether. The figures suggest the UK’s smallest companies were struggling more than their larger counterparts even before some of the recent cost rises such as the hike to energy bills.
Around 19% of micro-businesses surveyed between October 4 and 17 last year were not running at full steam, compared to 7% of all others. The ONS survey also showed that, of the smallest firms surveyed in March that were currently trading, only 12% said their turnover had increased compared with the previous month.
That was compared to 28% for all businesses surveyed that employed at least 10 people.
The figures come as the Bank of England raised its interest rate to 1% – its highest level for more than a decade. The increase is intended to reduce demand in the economy by making borrowing more expensive and encouraging people to save, which it hopes will eventually push down the price of goods and services.
But it means that the cost of repayments on certain loans and mortgages will also go up.
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 rising debts on the other. He added: “Consider the electrician who is trying to manage surging fuel prices and the costs of supply chain disruption at work, whilst also being hit by spiralling utility bills and, now, higher mortgage repayments at home.
“Microbusinesses are especially hard-hit by the cost of doing business crisis. Energy costs are particularly difficult to manage, as they are not eligible for the relief offered to consumers, and don’t benefit from the leverage that big businesses can bring to bear. As these new figures show, their fight to bounce back from Covid is that much greater than for a lot of big corporates.”
The FSB is calling for the Government to extend measures to ease repayments on loans taken out by small firms during the pandemic.
