Small businesses deliver their verdict on the economy

It’s truly disheartening to witness a profound lack of understanding within our Government regarding the invaluable contribution that small businesses make to our economy. I am seeing an alarmingly constant stream of updates regarding the closure of small businesses on my Instagram feed. These aren't solely enterprises that emerged in the pandemic, either. This economic climate is also affecting companies that have been operating for years. Unfortunately, the compounding pressures of Brexit, escalating costs and a decline in consumer spending have left many small businesses unable to continue. The difficult situation for small businesses is further exacerbated by the dual impact of escalating interest rates and the hike of corporation tax to 25%. These decisions feel like a harsh blow to those of us who are trying to establish and nurture businesses that work alongside our family commitments.

It has been a very challenging year with unprecedented business headwinds. In my opinion, it has been the most challenging year since we launched in 2014. We have had 14 consecutive interest rate rises, which have increased our business expenses significantly. Inflationary increases have added significant costs to the business too, especially wage inflation. Cash flow forecasting has been particularly difficult as there are so many changes, and in our market, a significant spike in abortive sales, which also affects cash flow modelling. I think this year will be one to forget and the Government is unfortunately not doing enough. In my opinion, the Bank of England has gone too far with rate rises. It has not taken into account the purported 18-month lag in the effect on the economy following a single rate rise. Consumers are being squeezed at every angle. I think it’s highly likely that there could be a recession next year.

As a provider of private sexual health testing services, we have seen steady business so far this year, with an increase in sales of our self-testing kits over the more expensive appointments. Our biggest challenge is recruiting staff, and we are seeing upward pressure on salaries with employers competing over good candidates leading to further pressure. It would be helpful to have guidelines from the Government on what they want SMEs to do to help to curb inflation, for example, guidelines on salary increases to avoid wage-led inflation. This could then apply to MPs and the civil service. The Government says it wants to bring down inflation, but where's the concrete strategy?

The past month has been quiet in fashion retail. Our boutique was previously busy, however with the inclement weather and cost of living crisis, consumer spend has decreased. Customers are being discerning in their spend. We believe that when the weather settles and when we get new stock in, we may see a shift. However, the speed at which interest rates going up may result in less spending, especially as more people's mortgage payments rise sharply. The government needs to get a handle on this and help small businesses by reducing energy costs and business rates as they are still high.

Personally, and despite the challenges of increased interest rates and fluctuating consumer spending due to the cost-of-living crisis, I've witnessed the resilience of UK businesses, driven by digital innovation. Our platform, which connects businesses with remote interns, has faced its share of challenges, particularly with business owners tightening budgets, affecting our subscription renewals and new client acquisition. Despite these challenges, we remain hopeful for the rest of 2023. The trend towards remote work continues, and we believe this will continue to fuel demand for our services. While we appreciate government support, we believe more could be done, especially for start-ups and small businesses in the tech sector. Initiatives fostering innovation, providing funding and simplifying regulations would be highly beneficial. The Bank of England's rate rises present a delicate balance. While controlling inflation is crucial, there's a risk of stifling growth.

For our own business, we're feeling positive about the coming period. We broad base the types of industries we work with, a lesson learned during Covid. We work with lots of different businesses across lots of different sectors, which gives us a cross-section view of 'feast or famine' depending on which industry you are in. Some sectors are positively thriving with these businesses forging ahead with growth strategies. They are often in sectors that have already taken the hit and then shapeshifted to suit the new economic climate, or that have become the market leader as competitors have fallen away, leaving them in pole position. For other businesses we work with, they've been hit by the headwinds caused by the general economic downturn we've been enduring since Covid and Brexit hit, whilst others have been literally hit by the weather headwinds. July and early August have been particularly cruel to the bottom line for businesses in gardening, hospitality and outdoor events.

We’re a marketing firm in financial services and Interestingly it’s our existing customers wanting to spend more to build more of a pipeline. That’s what we’re seeing more than usual. The conversations we’re having are about what more we can do to get more clients (for them) in now in case there is a property market slowdown later this year. August is normally a slow month for us and our clients and things ramp up in September to November.

Like many businesses in the UK real estate sector, we're facing a number of challenges, including higher interest rates and subdued domestic interest. However international investment has been steady and due to the shortage of housing supplied across our carefully selected markets in the UK, we have seen price growth year on year. It pays off to be discerning. The cost of living crisis may be a factor propelling the rental market, which continues to see unprecedented growth as more people in the UK either choose, or are forced, to rent.

We are seeing a lot of clients sitting on paper losses, especially where they have property portfolios. The rising cost of debt is making some with leveraged property portfolios re-evaluate their long-term viability. Most can afford to sit out the financial storm and wait for house prices to rise again in coming years, with some even looking at this as a buying opportunity. Divorcing clients, however, are often forced sellers and they are starting to be impacted by falling house prices. Many law firms do not ask for funds up front so some people will use the funds raised from selling a property to pay for the legal costs involved in divorce so any fall in value runs the risk that they may be left with a bill they can't cover. This is especially so when couples argue over the division of assets.

The problem is less the economy than the Bank of England that has oversight of it. We don't need more rate rises as they take a good length of time to actually impact people who are sat on fixed rates. As these fixed rates end those customers will get sucked into the new world of higher rates naturally so there is no need to hammer new mortgage clients and paralyse the housing market as a result by making new mortgages even more expensive. To me, it just seems that the powers that be have to be seen to be doing something after being asleep at the wheel without really doing anything of substance. Look at Spain where inflation is below 2%. They capped energy prices hard and early, lowered the cost of public transport, taxed excess profits and introduced rent controls. There isn't any reason the UK couldn't have done that.