Almost 500,000 UK small businesses ‘at risk of going bust within weeks’

By Oscarjack 5 Min Read

Rising costs have created a “ticking timebomb” for UK small business owners, the chairman of the Federation of Small Businesses (FSB) has warned, with almost half a million firms at risk of going bust within weeks without a fresh wave of government support.

While the FSB chairman, Martin McTague, applauded the chancellor Rishi Sunak’s latest support for consumers heir jobs unless the government rolled out targeted measures for their employers.

The chancellor dealt

“We don’t have any problem with the way the chancellor dealt with consumer needs,” told BBC Radio 4’s . “But there is still a massive problem with small businesses. They are facing something like twice the rate of inflation for their production prices, and it’s a ticking timebomb.

Mctague pointed to figures from the Office for National Statistics, which showed that 40%, or 2m, of the UK’s small businesses had less than three months’ worth of cash left to support their operations. Of those 2m.

He said: “It is a very real possibility because … they don’t have the cash reserves. They don’t have any way they can tackle this problem.”

The profits wiped

McTague cited one case in which a hotel owner in Scarborough wiped out by soaring energy bills, which were five normal levels. “They weren’t able to trade any longer without essentially trading at a loss and therefore damaging the future of their business and everybody that worked for them.”

Consumer price inflation hit 9% in April, the highest level since 1982. Costs have been driven higher by a jump in energy bills, record petrol cost of a weekly shop. The Bank of England has estimated inflation will peak at about 10% later this year.

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Prices increasing

Businesses have also faced soaring costs, with factory increasing by 18.6% over the past year, a record high. Many firms are raising their prices in response, feeding into inflationary pressures across the country. The tool and equipment rental firm Speedy Hire confirmed it had raised its prices in April to “offset the effects of cost inflation”. However, it warned that profit margins could be hit if customers were resistant to the price rises.

McTague said that without further support, the expensive emergency assistance used to keep businesses afloat through the Covid-19 pandemic would effectively be wasted.

“The chancellor spent approximately £45bn making sure those businesses survive the Covid crisis,” the chairman said. “Are we seriously to abandon them just as they’ve managed to get through one crisis and effectively lose that money for the taxpayer?”

UK companies

Three-quarters of small- and medium-sized UK companies are worried about the long-term impact the cost of living crisis, soaring energy inflation will have on their business, according to Barclays’ SME Barometer, released on Monday.

This article was amended on 31 May 2022 to make clear that Speedy Hire’s warning concerned its possible future profit margins rather than profits.

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