One-in-four UK businesses fear they won’t survive the cost of living crisis, survey finds
Almost a quarter of UK business leaders (23%) fear their company will not survive the financial year due to the current cost of living crisis, new research has revealed.
Around one-in-ten (9%) said that if the situation doesn’t change, they’d expect to go out of business in the next five years. The figures come from a new survey by Nucleus Commercial Finance, which investigated how soaring prices are affecting businesses across the country. Across the board, almost three-quarters (72%) of owners said the current cost of living crisis is a cause for concern for the survival or growth of their business.
With prices hitting record highs recently, the high cost of fuel is at the top of the list of the most worrying outcomes of the current crisis for business leaders. The rising cost of energy is also a major cause for concern. According to a previous report, small and medium-sized businesses (SMEs) have faced an average gas bill hike of more than 250% in the last year.
Additionally, unlike domestic customers, businesses aren’t covered by the energy price cap which could mean even higher running costs in an already volatile market. Cash flow, employee retention and higher transportation costs are also amongst UK business leaders’ biggest worries at this time.
The research also reveals that the biggest concerns for UK business leaders this financial year are:
- Rising cost of fuel
- Rising cost of energy
- Cash flow
- Employee retention
- Transportation costs
The majority of business leaders are also concerned the current crisis will not just affect their business directly, with higher supply costs and bills, but indirectly too.
In fact, with price hikes affecting consumers so highly, over two-thirds (68%) of those in senior management roles expect to lose customers, as they believe that people will not be able to afford their products or services anymore.
As part of their research, Nucleus Commercial Finance also spoke to several business owners directly, to find out how the current crisis is impacting them, and what measures they are taking to combat the rising costs.
Rob Williams, Director at Hawthorn, a UK-based clothing manufacturer, said: “Producing fabric is a part of every order we complete, and this involves using machinery which uses a lot of power and needs to be run for a considerable amount of time. Increasing energy prices therefore directly increase the costs of weaving fabric, and in the world of clothing manufacturing, where margins are often tight, this is becoming less easy to absorb.”
“This is not the only difficulty faced in terms of rising costs, however. The price of cotton has increased recently, too, with a surge of 41% in 2021. Cotton is the most commonly used fabric in the items our customers commission us to produce, so this increase, along with higher energy costs affecting fabric production, are big contributing factors to the amount of margin we can make.
“It’s important to us that our customers get a competitive price for their clothing, and that we preserve high levels of quality. However, this is proving to be more difficult at the moment, which is why we are exploring standardised designs, alongside custom-made. This way, we’ll be able to offer them a more cost-effective solution if their budget does not allow for fully bespoke.”
Chirag Shah, Founder and CEO at Nucleus Commercial Finance, commented on the research: “With costs sharply rising for both businesses and consumers, it’s no surprise that leaders across the country are worried about the survival and growth of their company. Our research has shown the price of fuel, transportation and energy, as well as cash flow and employee retention seem to be the most concerning aspects for UK businesses right now.
“While this is no doubt a challenging time for many companies across the country, there are measures that leaders can take to potentially ease the pressure and help with at least some of these aspects.
“For example, if energy bills are a big concern at the moment, you may want to review your premises and whether your current establishment is the most cost-efficient option for your business.
A growing number of companies now encourage their employees to work remotely to cut back on office management and running costs. If your business can function with a single central hub that employees commute to once or twice a week, instead of working from the office every day, you might be able to downsize and implement a hot desk system.
“You may also wish to review your suppliers. To start with, do your research on other potential providers and gather some quotes. You can then call up your current supplier, discuss the other pricing options you were given with them and see if they can match them, or even give you a better deal,” Shah concluded.