Inflation hits UK firms as horror poll shows over half predicts negative growth this year

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The latest quarterly report by the Federation of Small Business (FSB) on Small Business Index (SBI) found that the majority of small firms expect no or negative growth in the next year. The report was released as the inflation hit double figures for the first time in 40 years, the highest it’s been since 1982, at 10.1 percent.

According to the report, 53.4 percent of the small firms predict that they will either stay the same size or downsize or even close their business.

However, 46.6 percent predict they will grow in the coming 12 months.

Of the 53.4 percent, the data shows that 38.7 percent hope that they will stay the same size while 14.7 percent predict that they will close their business.

Of those businesses which expect to grow in the coming year, two-thirds (65.1 percent) cite the domestic economy as a potential barrier to expansion, a figure which has risen from 58.6 percent in the Q1 report.

The quarterly report comes at the time when the small businesses in the UK are struggling hard to make the ends meet as the energy price continues to soar.

The report further suggested that the information and communication sector has a better outlook for the future as 62.9 percent of businesses are expected to grow in the next year, compared with only 33.9 percent of wholesale and retail firms, and 34.9 percent of hospitality sector businesses.

Martin McTague, the national chair of the Federation of Small Businesses said: “The fall in GDP in the second quarter and the record-high inflation figures show the scale of what small businesses are up against, with our second quarter Small Business Index uncovering warning signs in many different indicators, from overall confidence to staff numbers and growth aspirations.

“Longer-term, those hopeful of solving the UK’s long-running productivity puzzle will not find much cause for cheer in this report, with small businesses held back from growing and investing by numerous factors.

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“A healthy business ecosystem requires businesses of all sizes to be able to realise their ambitions – from one-person start-ups with a great idea, through the small and medium-sized businesses which form the bedrock of the economy, right up to the largest companies, who rely on countless smaller suppliers and service providers.

“With our research indicating that smaller firms’ intentions to grow are muted at best, with businesses planning to grow outnumbered by those expecting to stay the same size, shrink, or even close their business, a key driver of economic recovery is threatened.

“Inflation is higher than at any point for the last four decades, and is also acting as an inhibitor to investment – machinery, parts, software, tools, rents, and employment and operating costs in general are all increasing in price more rapidly than small businesses can run to keep up.

“It’s a toxic recipe for the future health of the economy.

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“If the next Government wants to be able to level up the country, small business considerations must be at the heart of its thinking. Our members are looking for concrete help.”

According to the analysis, lack of access to appropriately skilled staff was also noted as a significant worry, mentioned by 33.9 percent of businesses which expect to grow as a limiting factor.



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