Small business owners facing a challenging new year

With so many businesses struggling with debts as a result of the Covid 19 pandemic and the furlough scheme having ended two months ago, only now are we beginning to see the devastating effects on small businesses.

Recent research reveals that a third of small businesses in the UK are planning on making redundancies over the next few months and this figure increases to four out of 10 in London. On average they will be cutting 45% of their workforce and will still have to increase prices to stay afloat.

Significant redundancies ahead

The research was conducted by accountancy firm Moore UK as part of their latest quarterly survey of owner managed businesses. Findings showed that 33% of small businesses across the UK and 42% in London were planning to make redundancies during the next six months, mainly linked to the financial struggles since the closure of the furlough scheme. A greater number of London based businesses were suffering because they were mainly restaurants, pubs and hotels which fall under the hospitality sector.

Maureen Penfold, the chair of Moore UK believes that although the predicted mass redundancies didn’t happen when the furlough scheme closed, business owners are now considering what steps need to be taken over the next few months.

“It’s surprising to see so many businesses are considering reducing staffing numbers so substantially. Policymakers should be careful not to assume that the economy is back in rude health – especially taking into account how the new restrictions just implemented may further impact businesses,” she added.

Increasing prices

The study also indicates that almost half of business owners surveyed will be increasing their prices over the coming months and blamed supply chain disruptions for this. Another 38% attributed their price increases to higher staffing costs. Many businesses are also having to provide high sign-on bonuses of £1,000 or more to entice workers in a competitive industry where there are shortages of key staff.

Business owners are a hardy breed and financial pressure comes with the territory but a combination of factors are creating the perfect storm as they struggle through Christmas and face an uncertain new year. The poll of just under 500 businesses highlighted the issues they are up against. Already under pressure from being saddled with debts they are also facing other challenges including supply change blockages, a shortage of staff to fill key roles such as chefs and drivers and increasing energy costs.

The hospitality industry

The Omicron variant is starting to damage the hospitality industry just as its predecessor did last year. The festive season is a critical period for the hospitality sector as businesses try to recoup some of their losses from earlier in the year and although the UK government has not placed restrictions on businesses, such as restricting group sizes or lockdowns, the messages are affecting consumer confidence. 

Earlier this week, Prime Minister Boris Johnson told the public to "think carefully before you go" out to socialise. Then, the UK's chief medical officer Prof Chris Whitty also advised people not to "mix with people you don't have to".

This has resulted in Christmas parties either being cancelled for the second successive year or being postponed until the end of January or February. Business owners in the hospitality sector from bars to restaurants and hotels to pubs are all enduring the same experience, a rapid escalation in the cancelation of bookings. The hospitality sector estimate that takings for December will be 40% down and up to double that in London.

Business groups are pressurising the government to help firms suffering because of the ever-increasing number of new variant cases. The Confederation of British Industry has urged ministers to provide urgent support and UK Hospitality is pushing for VAT discounts to be extended and business rates to be deferred. But the government is standing firm at the moment.

There has been plenty of publicity about the demise of the big high street chains but owner-led businesses are the lifeblood of the UK economy and are in desperate need of help. Shopping locally, whether that is in hospitality, retail or the professional services sector, is probably more important now than ever.

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