Over a quarter of small businesses warn of ceasing trading if outlook doesn’t improve

A survey of 1,070 UK SME (small and medium-sized enterprise) owners and self-employed workers by insurance provider, Simply Business, has revealed how the economic climate is taking its toll.

The SME Insights Report 2023 finds that 26% of small business owners believe they will be forced to cease trading if the outlook does not improve by the end of the year. This comes as almost half of those surveyed (48%) feel the rising cost of living is their most glaring challenge, and 52% anticipate a decrease of up to 20% in profits in 2023.

63% say that rising taxes, interest rates and inflation are eating into profit margins, and over a quarter are now spending up to 40% more on energy each month compared to the previous year.

“Two themes emerge from this report: first, the extent of the continued pressures on SMEs from the wider economic environment,” notes Jonathan Portes, senior fellow of the Economic and Social Research Council & professor of economics and public policy at King’s College London. “Second, and more optimistically, the resilience of the sector despite all this.”

Over half of small businesses (54%) remain optimistic that the UK economy will improve this year, and 77% are confident about their business prospects over the next six months.

And these businesses are adopting resilience measures: 62% plan to increase prices in the next six months and nearly a quarter are holding off employing new staff or expanding. Meanwhile, many are resorting to using personal savings, bank loans or loans from family and friends, with small businesses owed £32.1bn in late payments.

“Small businesses sit at the heart of our communities and are vital to our economy. It is essential that we continue to support them in these times of financial uncertainty.” – Alan Thomas, UK CEO at Simply Business