Market Update: We break down the business implications, market impact, and expert insights related to Market Update: Economy in crisis as 400,000 firms warn they could be forced to close ahead of Spring Statement – Full Analysis.
Around 400,000 UK firms could be forced to shut down if their concerns go unaddressed in the forthcoming Spring Statement.
The vast majority of small business owners have been absorbing higher costs themselves rather than passing them on to customers.
Research published yesterday by small business insurance provider Simply Business found that 82 per cent have experienced increased operating costs over the past year. Despite these rising expenses, just 12 per cent are increasing their prices to match.
The UK’s 5.6 million SMEs currently employ 16.9 million people, accounting for 60 per cent of all private sector jobs, making them the country’s largest employer group.
The financial strain is taking a significant personal toll, with nearly half of SME owners reporting that current pressures are affecting their mental health.
Experts are urging the Chancellor, Rachel Reeves, to seize the opportunity presented by the Spring Statement and create relief for these business owners.
These findings emerge against a backdrop of historically high business taxation, with CBI data showing the tax burden on UK companies has reached 30.5 per cent, the highest level this century, and projections suggesting it will climb to 32 per cent by the end of 2026.
Julie Fisher, UK CEO at Simply Business, said: “The tax burden on businesses is at a century-long high, compounded by rising energy and supply costs.”
She added: “Behind these numbers are real people under real pressure. Almost half of the small business owners we surveyed say financial pressures are directly impacting their mental health.”
Small businesses are shielding customers from rising costs by absorbing increases instead of raising prices, which hides how much inflation is really affecting the economy.
The impact is already being felt. Around 41 per cent of small business owners have paused plans to grow, while 37 per cent have stopped hiring until after the Spring Statement.
If the situation does not improve, the outlook could become much worse.
More than half of owners say they would keep trading even with lower profits, while 17 per cent may need to use personal savings to keep their businesses running.
Seven per cent warn they could shut down completely equivalent to about 397,735 businesses at risk of disappearing.
Rachel Reeves has made economic growth central her her agenda | GETTYIf Business Rates rise or support schemes are not extended, 29 per cent say they would be forced to increase prices, 12 per cent would stop investing in their business, and 7 per cent would consider closing their premises.
However, the research also shows strong potential for growth if conditions improve.
If taxes were reduced, 26 per cent of owners say they would expand their business, while 18 per cent would hire new staff potentially creating more than one million jobs.
The policy could trigger hundreds of thousands of redundancies across the country
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GETTYAnother 41 per cent say they would build up savings to protect themselves against future economic shocks.
Ms Fisher said: “What gives me hope is the resilience of this community. Despite the most challenging of backdrops, 86 per cent of small business owners tell us they still love running their own business.”
She urged the Chancellor to seize the opportunity presented by the Spring Statement, stating: “Given policy stability, targeted tax relief, and support with rising costs, these businesses won’t just survive they’ll thrive.”