The fallout from the cost-of-living crisis means UK SMEs are now experiencing pandemic-level stress. So what’s to be done?
You’re probably long past the point where cost-of-living fatigue set in, so we’ll spare you the gloomy summary and cut to the chase: it’s affecting SMEs in a range of ways.
Earlier this year, The Corporate Finance Network (CFN) and Association of Chartered Certified Accountants (ACCA UK) released a report which found “more than 1 in 4 (26%) of UK SMEs will struggle to meet rising payroll costs in April.” A combination of the Social Care Levy, an increase in the minimum wage and the rising cost of energy, fuel and supplies was affecting SMEs’ “ability to survive and grow.”
The really scary part of their study was that it was carried out at the start of the year, which we might now reasonably refer to as the good old days. Things have got much worse since.
Late payments fuelling stress
In May, Barclays revealed research that found 26% of UK SMEs had seen the number of late payments increase. 16% said they were struggling to pay their suppliers. In the construction and manufacturing sectors the figure was more than double that.
This cash flow crisis has an obvious and very visible impact on a business’ ability to trade. Yet there’s a hidden toll too. A quarter (26%) of respondents said they have felt anxious as a result of late payments. 21 per cent of business owners said they’d had sleepless nights.
All of this feeds into a more recent ACCA & CFN report which found that in June 2022, SME stress levels were just three percentage points down on November 2020. That was peak pandemic, when many businesses remained in a state of existential panic.
This worrying anxiety trajectory has been fed not just by rising costs and inflation, but by the ongoing uncertainty, the fear that things will get worse, and the end of the current SME loan scheme that was launched as a pandemic measure. The report specifically pinpoints skills shortages which mean even businesses that should, in theory, be able to trade their way to a less fraught future are struggling to recruit the people they need.
Meanwhile, the FT has highlighted a Financial Conduct Authority review that found repeated instances of “poor practice” in the way banks have been dealing with SMEs struggling with the cost-of-living crisis.
If you’re an SME owner right now, you could be forgiven for feeling that the whole world is against you.
Yet while these can help individuals manage the way they respond to stressors and give SMEs a framework for managing the mental health of their people, SME owners might reasonably point out that when the external stress points keep mounting up, there’s a limit to how successful they can be on embattled business owners.
As Glenn Collins, Head of ACCA UK, said, “Once again we’re seeing a very concerning outlook regarding the current state of mental health of UK SMEs. We need to eliminate rather than create uncertainty to support our SMEs. Unfortunately there is currently no clear support plan to replace the end of the recovery loan scheme, [leaving SMEs] in the lurch to weather the economic storm of the next few months until we receive greater clarity on support.”
SMEs have proven remarkably resilient over the past few years, despite the most adverse conditions. Many needed government help to see them through, but it seems many have escaped the frying pan only to land in the fire. They need government help again.
As Kirsty McGregor, founder of CFN said: “The onus rests on the government to support SMEs, to provide them with the resources that they need, instead of placing more hurdles for them to overcome.”
If you’re facing sleepless nights because of the current situation, we’re not about to pretend a payroll or HR solution can transform things for you, but it could go some way to making life easier. To explore ways we could help you free up time, staff resource or lower your monthly outgoings, talk to us now