Most small businesses fear the long-term impact of the UK’s cost of living crisis | Cost of living crisis

Three quarters of small and medium-sized businesses are concerned about the long-term effects of the crisis on the cost of living, rising energy bills and rising inflation on their businesses, a survey finds.

Just over half (51%) of SMEs said they were concerned that rising prices would affect consumer spending, in response to Barclays’ SME Barometer, a quarterly survey of business sentiment conducted for the bank.

Rising energy bills and higher raw material costs are putting pressure on companies and creating a challenging trading environment.

More than a quarter of the 574 companies surveyed said they feared they would be less competitive if they had to raise their own prices.

A tight labor market is putting further pressure on companies, they reported, with some struggling to hire new staff. Recently, companies in a wide range of industries, from nurseries to nightclubs, have reported difficulties finding employees for vital functions.

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However, the four-day celebration weekend for the Queen’s platinum anniversary provided a rare bright spot for SMBs, which said they thought sales would surge during the hiatus.

The late May holiday has been moved to June 2, bringing an extended break from then to June 5, as part of an event-packed year that marks the first time a British monarch has sat on the throne in seven decades.

Independent pubs, bars and restaurants expect a turnover increase of around £76 million during the anniversary celebrations on Thursday and Friday.

Companies that responded to the Barclaycard survey predicted the festivities would boost their revenues. Six in ten SMEs said they expect an average of 10% more turnover between April and June than in the same quarter a year earlier.

Hospitality and leisure businesses also expect revenues to be a third (35%) higher over the three-month period than in 2021, when they reopened as Covid lockdown restrictions eased.

While some SMEs are positive about their own prospects, nearly half said they are pessimistic about the outlook for the broader UK economy, while two-fifths said the current business environment is unstable.

Sentiment around business prospects and stability have both fallen since the first quarter and were well below levels recorded in early 2021, despite a period when many coronavirus restrictions were still in place.

Business concerns about the future economic environment follow a successful first quarter of the year, when more than half reported increasing sales compared to the last three months of 2021.

According to figures from Barclaycard Payments, these figures are supported by the volume of debit and credit card payments processed to SMEs, which saw a 20% increase in value and a 35% increase in volume compared to pre-pandemic levels between January and March. It said the strong growth in spending among SMEs can be attributed in part to the accelerated switch from cash to card payments during the pandemic.

Colin O’Flaherty, Head of SME at Barclaycard Payments, said: “After an exceptionally difficult time for the hospitality and leisure sector, it is encouraging to see that businesses have seen revenue increase in recent months, despite a challenging economic environment.”

Ross Robinson, owner of The Queens Pub and Hotel in Lytham, which will be holding an anniversary event, said the extra holiday should give the company a chance to take advantage of warmer weather and people’s desire to go out.

“We hope the public will use this time to support businesses in their area, to boost sales at a time when the overheads of running a business are at their highest in many years,” he said.

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