Businesses face costs £10k higher than last year

Small businesses (SMEs) in the UK face costs £10,000 higher than they were during the same period last year according to new research by Liberis.

The research also indicates that the cash buffer provided by various government-led Covid Business Interruption Loans is quickly depleting. Small businesses, which have relied on these loans to weather the storm of the pandemic, now face the harsh reality of diminishing financial support.

The average SME bank account balance has now dwindled. Liberis’ research shows a downward trend, with the average SME bank account balance dropping from £16,000 in June 2020 to £2,000 in July 2023.

Alex Ivison, Chief Risk Officer at Liberis said “Since the onset of the COVID-19 pandemic in 2020, the UK economy has experienced one of the most significant inflationary challenges in four decades. While attention has primarily focused on the Cost of Living crisis affecting individuals and households, the escalating Cost of Doing Business has received relatively sparse coverage.

“The rise in expenses has been unevenly experienced. Our research shows that small businesses in the hospitality industry are experiencing the worst of the cost of doing business crisis. A tight labour market, higher energy costs, and rising food prices have meant these businesses’ average costs have more than doubled since 2020.”

Liberis says that to make matters worse, the Bank of England reports that mainstream lenders are increasingly withdrawing credit to small businesses, further exacerbating the financial strain they face. The lack of accessible finance presents a threat to British small businesses and the UK economy. SMEs account for around half of the turnover in the UK private sector and three-fifths of employment in the UK, according to the Department for Business & Trade. Despite the impact small businesses have on the UK economy, the latest figures from the Bank of England estimate that there is an SME funding gap of £22 billion in the UK.