Nine out of ten small businesses in the UK are grappling with rising costs that threaten their growth plans. This situation is not just a concern for business owners; it can affect every person who relies on small businesses for jobs, goods, and services.

The Cost-of-Living Crisis Hits Small Businesses Hard

New data from Novuna Business Finance reveals that a staggering 90% of small businesses report that aspects of the cost-of-living crisis are jeopardizing their prospects for 2026. This finding is part of the Business Barometer study, which has tracked the growth outlook of small business owners quarterly since 2015. The latest results indicate a three-year peak in this worry, reflecting a slight uptick compared to previous years.

Among small businesses surveyed, over 40% expressed concern about customers spending less, with particularly high anxiety levels in sectors like hospitality (60%) and retail (72%). Furthermore, half of the respondents in hospitality worry about reduced customer traffic over the summer season. This creates a critical situation where diminished spending can lead to broader economic implications.

Challenges with Rising Operational Costs

Many small companies are facing substantial operational costs. One-third (33%) report being forced to absorb price increases from their suppliers. Surprisingly, 35% of these businesses cannot pass these rising costs onto customers. This issue disproportionately impacts sectors such as manufacturing (53%) and agriculture (51%). In hospitality and retail, a significant number (53%) are also unable to transfer these inflationary pressures to their customers.

Concerns about skyrocketing energy costs weigh heavily on small business owners as well. Around 32% worry about how these prices affect their budgets, while 29% express apprehension regarding transportation costs. Additionally, one in four businesses (25%) fret about increasing rents and business rates. The worst-hit sectors include manufacturing (49%), agriculture (39%), and transport and distribution (53%).

Wage Pressures and Regional Disparities

The inability to pay competitive wages is a growing concern. About 21% of small business owners fear they might not afford to increase salaries in line with the rising cost of living. This pressure is especially acute in the manufacturing sector, where 39% express worry.

Regionally, businesses in Yorkshire, the North, and Scotland are more likely to report that cost-of-living impacts threaten their operations. For instance, 56% of small businesses in the North East are anxious about declining customer spending, while just 44% in London share this concern. The disparities extend to the impacts of rising supplier costs and customer volume challenges as well.

The Need for Financial Support

In light of these challenges, half of small businesses are actively seeking funding to invest in growth opportunities. This need for financial backing is particularly pronounced in the manufacturing (62%), hospitality (62%), and retail (59%) sectors. Scotland shows the most significant surge in businesses requiring funding, increasing from 46% to 55% year-over-year.

Jo Morris, Head of Insight at Novuna Business Finance, emphasizes the ongoing struggles small businesses face due to rising costs. She underlines that falling customer volume and the burden of higher taxes are adding to the pressures. The organization is committed to helping small businesses overcome these hurdles and thrive in the challenging economic climate.

What this means for you

Small businesses are crucial to the everyday economy, and their struggles can affect your job and local services. If you’re ever required to review an employment contract, legal-document-to-plain-english-translator/”>AI legalese decoder can help decode the fine print quickly and easily.

Source: https://www.credit-connect.co.uk/news/nine-in-ten-small-businesses-say-cost-of-living-is-threat-to-growth/