One in three small firms planning major staff cuts

A third of UK small businesses are planning to make staff redundant over the next few months, rising to more than four in 10 in London, according to a new survey analysis by Moore UK.

The research found that 33% of owner-managed businesses in the UK are planning to make redundancies now the safety net of furlough has been removed.

Moore UK’s quarterly survey of owner-managed businesses has indicated that companies in London are more likely than those in any other part of the UK to be planning redundancies, with 42% considering laying off staff. Moore says that this likely reflects the effects of the pandemic on the finances of restaurants, hotels and pubs, which make up a significant part of London’s economy.

Maureen Penfold, Chair of Moore UK, says that while a wave of redundancies did not materialise at the end of furlough on 30th September, many smaller businesses are now waiting to see whether layoffs become necessary over the coming months. “The UK is far from out of the woods when it comes to redundancies. It’s surprising to see so many businesses are considering reducing staffing numbers so substantially. Policymakers should be careful not to assume that the economy is back in rude health.”

“No smaller business wants to lay off staff if it can be avoided and it seems like many are still waiting to see if they need to press that button. Their cash flow might allow them to keep their full workforces employed for now but they have plans in place to quickly make redundancies if they need to.”

The survey also showed that 49% expect to have to increase the prices they charge over the next six months whilst 59% of those planning to raise prices say that disruption to their supply chain is the main reason for doing so.

Penfold continued “The effects of supply chain disruption because of Brexit and Covid have been felt keenly by a lot of smaller businesses. These issues are now endemic – a lack of logistics capacity and bottlenecks in ports around the world are driving up the cost of the goods they buy. Price increases are the only response they have.”

“Unfortunately, that is likely to continue to increase inflationary pressure.”

38% of businesses say that increased staffing costs have been the main contributor to them increasing their prices, while 33% ascribe it to changes in the VAT treatment of overseas goods since Brexit.

34% of owner-managed businesses also say that supply chain pressures are among the biggest challenges they are facing over the next six months. This ranks higher than recruiting and retaining staff (27%), taxation (21%) and reducing carbon emissions (21%) and only slightly lower than securing new business (37%).