The Business Cost of Living Crisis
If I were to bring up the state of the UK economy, you might sigh. It’s clear that businesses as well as families across the country are feeling the pinch, and if you’re running a small or medium-sized enterprise (SME), it’s more than likely that you’re among them. With the weight of taxes, rising costs across multiple fronts, and the sheer volume of SMEs in the UK, it’s evident that the cost of living crisis isn’t just a household issue – it’s a business issue too.
Let’s chat about what’s been brewing and the various elements squeezing the UK’s business landscape.
The Weight of Taxes
If you’ve been managing the financial side of a business, you’d know how heavy the tax burden feels. Let’s break this down a bit.
National Insurance (NI): Think of NI as a tax on earnings. If you’re an employer, you contribute for every employee you have. So, the more people you hire, the higher your wage bill, the more you need to pay out for NI. This could be a real pinch to your pocket and not conducive to job creation.
Corporation Tax: This one’s a bit more straightforward. It’s the tax your business pays on its profits. Higher corporation tax? Yep, that’s less profit for you at the end of the day. A cut in Corporation Tax would make a big difference – yes, there would be more profit but most entrepreneurs and business owners will invest that extra in capital spending or, even better, employing more people.
And VAT – don’t get me started! It holds back businesses from growing as they try to stay below the threshold. It’s also a mess knowing what is and what isn’t VATable.
The essence? When taxes rise, it’s like a domino effect. Your costs go up, and suddenly, maintaining a healthy profit margin becomes more of an uphill battle.
Skyrocketing Operating Costs
If you thought taxes were the only headache, brace yourself. Rising costs across the board have been hitting businesses hard.
Energy: Let’s face it. The cost of energy has been soaring. Whether it’s to heat your premises or to keep the lights on, the bills just seem to keep rising.
Fuel: If your business involves any kind of transportation, you’ve felt this. The increasing fuel prices make every mile costlier.
Wages: A tricky one, this. On one hand, you want to offer competitive salaries to attract and retain the best talent. On the other, rising wages can gnaw at your profitability. It’s a delicate balancing act.
SMEs: The Unsung Heroes Bearing the Brunt
Now, let’s talk numbers, shall we? At the start of 2022, according to the Federation of Small Businesses, there were a whopping 5.5 million small businesses, making up a staggering 99.2% of the total businesses. When we throw in medium-sized businesses, this figure jumps to 99.9%. Quite literally, SMEs are the backbone of the UK economy.
To put this into perspective, SMEs account for a massive 61% of the total employment and about half of the UK private sector’s turnover. That’s 16.4 million people working in these businesses, generating an impressive £2.1 trillion. Dive a bit deeper, and you find that small businesses (0-49 employees) alone employed 12.9 million people and turned over of £1.6 trillion.
So, What Does This All Mean?
Simple.
If you’re feeling the squeeze, know that you’re not alone. Businesses big and small are navigating these choppy waters. The key will be adaptability, innovation, and a dash of perseverance. And, as history shows, the UK business spirit is nothing if not resilient. Here’s to facing challenges head-on and emerging stronger!
Energetic, straight-talking, entertaining, and hugely inspirational, Big Business Events Founder Adam Stott is currently one of the UK’s leading speakers on business, entrepreneurship, and coaching.