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Small businesses in Britain are facing significant challenges as the cost of living squeeze continues to weigh on economic growth. With people struggling to afford basic necessities such as groceries and electricity, UK small businesses are seeing less and less revenue from sales of nonessential products.
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Two in Five UK Small Businesses Expect Sales to Increase Soon
Recent reports from the Federation of Small Businesses (FSB) have revealed that two in five UK small business owners experienced a decline in sales during the first quarter of this year. Despite increasing business confidence among owners and managers, rising costs and a lack of consumer demand are hampering progress.
According to the FSB’s latest small business index, a record 92% of companies have reported higher costs in the first quarter of this year compared to the same period last year. This has led to a challenging start to the year. However, two in five small businesses expect their sales to increase in the next quarter. Nonetheless, many small business owners are still concerned about the future. Moreover, significant challenges remain.
The Future Remains Uncertain
Confidence is rising again after plummeting at the end of last year. However, the FSB has warned that there are still “dark clouds” on the horizon for UK small businesses.
Further interest rate increases from the Bank of England could dampen small business recovery. Meanwhile, firms are also struggling with the high costs of energy, raw materials, transport, and rising staff wages.
These challenges are expected to persist for some time. Moreover, economists anticipate the Bank of England will increase interest rates from their current level of 4.25% in response to inflation sticking above 10% in March. This is more than five times the central bank’s 2% target rate.
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UK Small Businesses May Be Rebounding Despite Challenges
The FSB, which represents more than 150,000 business owners and self-employed workers, surveyed nearly 700 people to gather these insights. Despite the reading on the small business index rising to -2.8 in the first quarter, up 43 points from the final three months of 2022, it is still about 18 points below the same period a year ago.
Martin McTague, the FSB’s national chair, said that while UK small businesses may be turning the corner and rebounding after the pandemic and energy crisis, there are still plenty of obstacles to overcome. “The prospect of further interest rate rises is causing significant disquiet, at the same time that costs remain at serious highs,” he added.
“To tackle these challenges, small business owners need to be proactive and take steps to mitigate their risk,” explains Mike Needham of money platform Doddler. This might involve reducing costs by renegotiating contracts with suppliers. Alternatively, businesses could introduce new technologies to automate processes and save time. It could also involve investing in marketing campaigns to boost consumer demand and increase sales.
Government Support Is Available
UK small businesses can also benefit from government support. This includes grants, loans, and tax relief. Many local councils and chambers of commerce offer advice and support to small business owners. This can help them to access funding and navigate regulatory frameworks. It is crucial for small businesses to take advantage of these resources, as they can provide the boost needed to stay afloat during difficult times.
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