Cost crunch bites deep for small firms

The latest Small Business Index report published by the Federation of Small Businesses shows most firms expect either no growth or negative growth in the next 12 months, as cost pressures weigh heavily on the small business sector.

Data covering the second quarter of this year was collected from a survey of 1,306 small firms in June and July. Among a number of worrying findings, the headline confidence figure recorded the second largest fall in the history of the Index, with only the first quarter of 2020, when COVID-19 first struck, yielding a sharper decline.

Specifically, the survey highlighted small firms’ anaemic growth expectations. Indeed, the combined proportion of businesses predicting they will stay the same size, shrink or fold over the coming year actually outnumbered those that are predicting growth.

While a lack of access to skilled staff was still found to be a significant area of concern across the small business community, the growing impact of inflation as an inhibitor to investment was also highlighted. The survey saw the highest-recorded proportion of firms saying their costs are higher than a year ago at 89%, with fuel and utilities the most commonly cited cause of increasing costs.