Two in five small businesses think they’ll be unprofitable next year

‘Pricing and profitability’ has been the main financial concern of small business owners in 2023, with 42 per cent of them worried that their business would become unprofitable in the next 12 months, a new study has revealed.

In 2022, profitability didn’t even make the top 10 concerns.

The findings of the survey by digital payments solutions provider takepayments also underline the impact of the cost of living crisis, as ‘consumers less willing to spend money’ was the second most common concern overall, with almost similar number of (41%) businesses saying they noticed a decrease in consumer spending in the last 12 months, double what was reported in 2022 (21%).

The study surveyed the owners and senior leaders of over 1,000 UK-based SMEs across dozens of industries to understand their financial concerns, and compared the results with findings from 2022 to investigate what’s changed over the last year.

Thirty per cent voted for the ‘price of rent and energy’ as interest rates remain at a 15-year-high of 5.25 per cent in order to combat inflation, driving up the prices of commercial mortgages.

The number of businesses with cash flow issues has risen significantly from 25 per cent in 2022 to 37 per cent in 2023.

Commenting on the findings, Jodie Wilkinson, head of strategic partnerships at takepayments, said: “It’s clear from our data and calls from businesses to extend business rate relief that financial concerns remain at the forefront of business owners’ minds.

“The British Retail Consortium has stated that a hike in business rates would add an additional £470m per year to the total business rates bill of UK retailers, which consumers would ultimately pay the price for. With consumer spending already a big concern for UK businesses in 2023, it’s natural that business owners will start to prioritise their financial strategies and adopt measures to manage costs effectively.”

Ahead of the Autumn Statement next week, businesses and retail bodies have been advocating for a freeze on the business rates multiplier and an extension of the current business rates relief scheme for retail, hospitality and leisure businesses to avoid price hikes and job losses.

“We may see businesses of all sizes adapting their strategies to cater to these rapidly changing consumer behaviours. While prices are still high, that might mean some businesses choose to cut into their margins in the short term to retain customers for the longer term,” Wilkinson added.

“The increase in cash flow issues could be related. With everyone tightening their spending, it can be difficult to justify any expenditure that isn’t critical, so businesses selling delayable goods or services are fighting an uphill battle.”