Rising costs tops the list of concerns for small businesses

Seven in ten (70%) SMEs are concerned about rising costs this year with nearly half (42%) stating they are ‘very concerned’ as inflation continues to erode companies bottom lines, new research from Shawbrook reveals.

When asked what their main focal points will be over the next year, 46% agreed that managing rising costs would be a priority. Only 2% of respondents reported they are not concerned at all about rising costs.

Whilst inflation topped the list of concerns, both rising interest rates (67%) and general economic uncertainty (69%) were also stated as pain points by respondents. Further down the list, SMEs also named energy bills (50%) and paying-off debt to balance the books (54%) as key worries.

As inflation has continued to come down from the double-digit highs of last year, some of these concerns will likely soften in the next 12-months with SMEs beginning to feel more optimistic about the macroeconomic environment.

In fact, senior decision makers are already feeling upbeat, with many considering significant growth plans in the year to come. Over the next 12-months 41% of respondents revealed they are looking to grow and hire new staff, 42% are aiming to upskill existing staff members and a third (32%) plan to bolster their leadership team. 17% are eyeing up an international expansion, and 21% are preparing for a digital transformation in the next 12 months.

Interestingly, nearly one in five (17%) of senior decision makers are considering an exit strategy in the next 12 months and 16% are planning to acquire a new company as a road to further growth.

With the Bank of England largely expected to begin cutting rates later this year, the price of debt may start to come down and could spark an up-tick in larger business activity that was previously shelved due to the uncertain economic climate.

Neil Rudge, head of enterprise at Shawbrook said: “The economic challenges that SMEs have faced in the past year have been well-documented and our research indicates that despite positive indicators, we are still in somewhat of a no man’s land economically. Senior decision makers at the helm of the UK’s SMEs are continuing to monitor the impact that rising costs are having on their business and are adjusting their plans accordingly. However, the good news is that the economic picture is currently predicted to brighten this year and the plans that SMEs are making to grow their businesses in the next twelve months are a clear indication of optimism among this community.

“Indeed, if inflation continues its downward trend and rates subsequently start to come down, as has been widely predicted, we could see many SMEs push the button on plans that had been put on ice in 2023. For businesses that are putting together their plans for the next year, consulting with a specialist lender who can provide a tailored funding solution will help to ensure those plans are achieved.”