Small businesses, including independent convenience stores, are now operating under pressures comparable to - and in some cases exceeding - those experienced during the Covid-19 pandemic, according to a new report published on Tuesday (Feb 10) by the House of Commons Business and Trade Committee.
The Committee’s inquiry finds that while emergency support was rapidly mobilised during the pandemic, there is currently no equivalent, coordinated response to the cumulative pressures now facing small and medium-sized enterprises (SMEs), despite their central role in the UK economy.
SMEs account for 99.8 per cent of all UK businesses and form the backbone of local economies and high streets. Evidence to the Committee shows that many are now operating with little financial resilience and limited capacity to absorb further shocks.
Retail crime is estimated to cost businesses £4.2 billion a year, including prevention costs. In convenience stores, crime adds the equivalent of 10p to every transaction. Evidence points to inconsistent policing responses and under-resourced enforcement, the committee states in its report.
Furthermore, it states that in the first half of 2024, an average of 38 stores closed each day on Great Britain’s high streets. The Committee heard that business rates, retail crime and energy costs are disproportionately affecting bricks-and-mortar businesses.
The Federation of Small Businesses estimates that tax compliance costs SMEs 242 million hours and nearly £25 billion each year. The British Retail Consortium estimates that the Autumn Budget added £7 billion to the cumulative cost of policy and regulation affecting retail.
Average electricity prices in 2024 remained nearly double their level three years earlier. Since 2022, over a quarter of sub-postmasters have experienced energy bill increases of more than 50 per cent, with some reporting monthly costs doubling, states the report.
The Committee heard repeated testimony that many firms have already passed rising costs on to consumers and are now reaching the limits of what customers can absorb.
The Committee concludes that the current pressures on small businesses are cumulative, structural and self-reinforcing. Without action, these conditions risk accelerating business closures, hollowing out high streets and undermining the Government’s growth objectives.
Among 10 recommendations, The Business and Trade Committee called on the Government to replace business rates with a fairer system that reflects a firm’s ability to pay, reduces the burden on bricks-and-mortar businesses, and supports the vitality of high streets.
The committee also called on the government to introduce targeted energy support for SMEs, including fairer pricing, stronger protections for smaller users, and greater transparency in the energy market as well as provide clear national leadership on business crime, strengthening policing, enforcement and trading standards capacity, and ensuring crime against businesses is treated as an economic priority.
Rt Hon Liam Byrne MP, Chair of the Business and Trade Committee, said, “The evidence we heard during this inquiry was stark. Many small businesses are now operating under pressures comparable to those experienced during the Covid pandemic but this time without an emergency support framework in place.
“SMEs are facing late payments, rising energy costs, increasing crime, a complex tax system and barriers to growth that are compounding rather than easing. These pressures are not isolated; together they pose a real risk to business viability, high streets and economic growth.
“High streets do not die by accident. If the Government is serious about growth, it must set out a more coherent and ambitious plan for the businesses that make up so much of the UK economy.”