Across nearly every news channel you’ll see the endless list of worries that households are facing right now. Whilst households are struggling, what isn’t being covered so much is the fact that the same issues are have a huge negative affect on small businesses in the UK.
In this blog post we’ll discuss the current issues businesses are facing, what’s being done and what you can do right now to help ease some of the pressures.
The current issues for small businesses
First of all, the fact the fuel prices are consistently rising are taking their toll on businesses that rely on the use of vans, cars and lorries. This doesn’t just include small businesses, but their suppliers too!
Then there’s the expected energy cost increase in October, this doesn’t just effect people’s household, but also business premises and equipment that’s used to provide their goods and services!
Inflation is a blanket concern for everyone in the UK right now. ONS stats show that inflation is the highest it’s been for 40 years at 9% and small businesses in the UK are feeling it. In a survey carried out by Veem, nearly 40% of small businesses say they’re seeing a negative effect on their supplies due to inflation.
Customers are also holding on to their money and becoming more frugal due to inflation. This means that small businesses are losing out on new customers, or even repeat custom because people don’t want to spend.
Combined with the 1.25% increase in NICs for the Health and Social Care Levy, employers are paying more to the Government in National Insurance payments.
In July the Class 1 Primary and Secondary National Insurance threshold will increase, however if an employee earns over £35,000, the 1.25% increase in NICs will outweigh the threshold increase. You can read more about that here.
On the subject of employees, its worth mentioning that the labour market is shrinking, which means there are less people searching for jobs right now. This in turn is pushing wages up and businesses could end up spending more money on salaries than they would have in the past.
Then there’s the late payments. This drastically increased during covid lockdowns and is continuing now. Barclays state that over a quarter of UK businesses are being affected by late payments due to the rising cost of living.
What’s being done
Rishi Sunak has urged companies to increase spend to help invest more, train more and innovate more. He has pledged to slash taxes for businesses to help them do so.
Some business experts are calling for business rates relief and more loan schemes, similar to those that was seen during Covid lockdowns, as well as a similar scheme like the £150 council tax rebate, but for business rates.
What you can do in the meantime
Whilst policy and decision makers are deciding what to do, there are a few things you can do now to help ease the pressure of all the current issues.
First of all, you can sign up to CreditFocus. This tool allows you to understand and grow your credit score (which means you’ll get better terms should you need to borrow money) as well as manage your cashflow and carry out company credit checks.
Credit checking a business allows you to see the financial stability of it. You can check your suppliers to make sure they’re in a good enough financial position to deliver what’s promised.
You can check your competitors to get a snapshot of their performance. You can even credit check your customers if you’re a B2B business and see how late or early they normally pay their bills. Allowing you to plan and manage your cashflow accordingly. What’s even better it has a 30-day free trial! Click here to find out more.
Another thing you can do to cut costs is looking to reactivate old customers. The chances are that you have their contact details and already have a positive relationship with them. Depending on the nature of your business, it could be a lot more cost effective and efficient to try to encourage old customers to repeat purchase.
One final suggestion is to become a limited company.
- Firstly, because it can be more tax efficient to structure your business as a limited company which could lead to saving thousands over the course of the year.
- Secondly, you will have limited liability. If you’re a sole trader and owe money to lenders from business activities which you can’t afford to pay, your personal assets such as your life savings, car and house are at risk of being taken to pay what you owe. With a limited company, all your personal assets are separate from the business, which means they can’t be used to settle the debt.
- Finally, it costs less than you think to set up a limited company. Our company formation bundles start from just £9.99 and include everything you need to start your limited company and more.
You can see all our formation bundles by clicking below.