Cost of living crisis: our recent survey results and advice on how to stay resilient

A lot has changed since we shared our first ‘Cost of doing business’ survey results. This time, the financial pressure is creating even more challenges for many small businesses across the UK – and they continue to witness the severe impact that the spiralling cost of living is having on them.

This has been a hot topic in the UK since late 2021, and the debate has merely intensified over the last few months. With this in mind, we felt it was important to continue to lead the conversation, sending out a second ‘Cost of doing business’ survey.

This time around, we were pleased to hear from almost 2,000 members; nearly double the number in our last survey. Again, we wanted to learn more about how recent circumstances have affected our members and to ask for their thoughts on the Government’s support package. 

Read on to see what your fellow business owners had to say, and what’s changed since the previous survey 3 months ago. You’ll also see our call for government action and some advice from former Small Business Commissioner and Tide Cash Flow Expert, Philip King. 

Table of contents:

• The top 3 concerns for small businesses
• SMEs are looking for support
• How small businesses are mitigating the impact
• Tide’s call for government action
• Advice on how to stay resilient during the cost of living crisis as a business owner
• Wrapping up

The top 3 concerns for small businesses

While the UK’s inflation rate is still on the rise (it hit 9.4% this September – slightly higher than the 9% marked back in June 2022 and the highest it’s been since 1982), the factors pushing prices up remain the same: rocketing energy bills, inflation, and increased interest rates, along with the dual impact of Brexit and the pandemic disrupting global trade and supply chains.

And for one in four SMEs, inflation is still having a significant impact on their businesses – up from one in five in June this year when we launched our first survey.

1. Fuel and energy prices

Once again, fuel and energy prices topped the list of small businesses’ concerns.

This is despite the 6-month energy support package provided by the Government for UK businesses in September 2022 to reduce their energy bills. In fact, almost one in ten (9.1%) SMEs we surveyed said that it will, unfortunately, come in too late to support them, and nearly half (49.9%) said fuel and energy prices are still having the biggest financial impact on their businesses.  

In light of their concerns, 1 in 5 business owners (20.7%) have considered becoming more energy-efficient and getting advice on reducing their business’s energy consumption, and 36% are actively thinking about investing in renewable sources of energy as a way of bringing their costs down. 

2. Inflation

Optimism among small business owners remains low, with inflation ranking as their second biggest concern –  this was the case for 26.2% of our respondents, up from 22.4% in June 2022. This situation continues to affect other countries worldwide, with the key reasons remaining the same: the continuing rise in demand for products post-pandemic, and the war in Ukraine.

3. Interest rates

Fears over rising interest rates have also grown, with 6.6% of small business owners saying it’s their third biggest concern. This is up from 4.8% in our June survey, and is especially challenging as the Bank of England is expected to raise them again significantly in November. It’s also important to note that concerns over interest rates topped those of supply chain issues, which had been the third biggest concern in our previous survey. However, 10.4% of those we surveyed were still worried about their supply chain, compared to 8.3% in June.

 “Rising interest rates are a worry and there’s less scope to mitigate the impact. If fuel costs rise, you can choose to drive less, but there are fewer options if you have an outstanding loan, or are seeking new funding.”

Philip King, Small Business Commissioner and Tide Cash Flow Expert

SMEs are looking for support

For many SMEs who are still trying to get back on their feet after the economic turmoil of the pandemic and Brexit, price hikes are making it even more difficult for them to make ends meet – even forcing some to pull down their shutters.

Amidst this backdrop, we wanted to find out what might help SMEs keep their businesses open and running. In our recent survey, 32.2% of small businesses said that energy price reductions would be the single biggest help for them amid the current cost of living crisis, while almost a quarter (23.8%) opted for a reduction in inflation. 

How small businesses are mitigating the impact

Although three-quarters (76.1%) of business owners stated that the cost of living crisis is having a negative impact on their businesses, they’re still holding the course in stormy waters despite the challenging environment they’re in.

• Our recent survey found that 63.1% had to increase their own hours, while 32% relied on friends and family for support and 24.1% took on another job elsewhere

• 1 in 5 small business owners (36%) have considered reducing energy consumption, amid rising energy costs

• Other measures that the business owners we’ve surveyed have had to take in response to their financial worries include laying off staff (11.2%), reducing the number of their employees (9.7%) and cutting contractor hours (10.6%)

We spoke to our member Kate, the founder of LOUD Architects, and here’s what she said about the impact of the current economic situation on her field of business:

“The prices of materials are increasing worldwide, which is causing a knock-on effect on builders and homeowners. And because construction prices are also on the rise, clients are forced to be selective and take the initiative to shop around. This actually allows them to make more suitable decisions when it comes to the design, and ultimately create a better build than if they had rushed it through!”

Tide’s call for government action

While the Government has set out some measures to support businesses with their energy bills like the Energy Price Guarantee scheme, it still needs to take further action to encourage economic recovery. 

Over 450,000 small businesses use Tide, and we’re urging the Government to do more for them and the rest of the UK’s SMEs. 

In response to the Government’s support packages, here’s what our CEO, Oliver Prill, had to say:

“While the energy support package has had some positive impact on small businesses, more needs to be done to help them. There have been some interesting ideas floated around to reduce the regulatory burden on small businesses. But we do urge the Government to look at specific actions to help small businesses, such as VAT relief.”

Advice on how to stay resilient during the cost of living crisis as a business owner

Rising costs have led to challenging circumstances for small businesses in their personal and professional lives.

That’s why we asked former Small Business Commissioner and Tide Cash Flow Expert, Philip King, to share some tips to help you adopt a proactive mindset and keep your business afloat:

“Small businesses are passionate, resilient and tenacious. They’re good at what they do. Looking back at what could have been done better won’t help or make things easier.  

• Stay positive and resilient. Micro-business owners are known for being resilient and driven. That’s why 75% haven’t considered shutting down despite all the pressures they’re facing

• If you need funding, check all your options first and seek advice from experts. Get applications in as soon as you can to avoid more difficult and stressful situations. Look at the relevant Tide features and other resources

• Be flexible. Consider opening at fewer (or different) hours to maximise your revenue and reduce your costs (plus, your staff would likely prefer shorter hours to no job at all). You could also change your business hours to make the most of the daylight. It may not be the ideal solution, but you should be practical and realistic. Short-term pain is better than long-term closure

• If suppliers are worried that your business might close down, they could be open to renegotiating their terms in order to retain your custom. Agreeing on longer payment terms will help to sustain your business’s cash flow

• If need be, see if you could relocate your offices to more affordable premises, negotiate a rent reduction, or even rent out a non-used space

• Chase clients who owe you money for unpaid invoices. This will bring cash into your business, and with no interest charges! Take a look at episode 5 of our Cashflow Masterclasses on how to get your overdue invoices paid quickly

• Consider who you do business with when offering them credit terms. Make the process strict to reduce future risks of late or non-payment

Wrapping up

Uncertainty among business owners remains high as the cost of living crisis is firmly gripping the UK. But in spite of these significant economic headwinds, it’s important to stay focused on your business goals and seek support for yourself and your team where you need it.

Philip says:

“Business owners must focus on the present and future, rather than looking back at what might have gone wrong in the past. They should use their positive energy to manage through whatever they’re facing right now, so they come out on the other side positively.” 

Looking for more support? Check out our round-up of Tide products that can help small business owners amidst the cost of living crisis.

Sources used for this article (checked as of 11 October 2022):

• Office for National Statistics – Consumer price inflation, UK: May 2022
• The Guardian, Energy Support Package: what business owners need to know 
• Reuters, Bank of England won’t make emergency rate hike but will go big on Nov 3
• GOV.uk press release, Government announces Energy Price Guarantee for families and businesses while urgently taking action to reform broken energy market