One in three businesses seriously concerned by overseas conflict

The percentage of UK small businesses citing barriers holding their business back from growing has hit a six-year peak (84%), with the impact of overseas conflict on energy and fuel prices in the UK now a serious concern for one in three enterprises (32%), according to new findings from Novuna Business Finance.

The data show that current geopolitical uncertainty is driving the disruption felt by small business owners this spring, proving far more significant than local or immediate market challenges. The most significant barriers to growth cited included: macroeconomic uncertainty (51%), rising oil prices (32%), and, as a consequence, higher running costs (31%). In contrast, the cost of skilled labour (20%), volatile cashflow (17%), fluctuating exchange rates (7%), digital proficiency (6%) and having outdated equipment (5%) emerged as relatively smaller concerns.

Around the UK, small businesses in geographical extremes were far more likely to be impacted by rising energy prices. Business owners in Scotland (40%), Wales (38%) and the South West of England (42%) were significantly more likely than the national average (32%) to say the impact of overseas conflicts on energy and fuel prices in the UK was a barrier holding their business back from growing.

The long-term picture suggests the percentage of enterprises experiencing barriers to growth has been slowly rising in recent years, but the new norm is at a higher level than the years before the pandemic in 2020. This Quarter, small businesses in the Manufacturing (94%), Retail (95%) and Transport/Distribution (90%) sectors are most likely to cite one or more barriers holding back planned business growth.

In Agriculture, the percentage of small businesses bemoaning barriers to growth has hit a four-year peak (86%). In Construction, Retail and Media, growth barriers are at their highest level since 2020. Across six UK regions, there has been a year-on-year rise on the percentage of small businesses citing factors holding back growth – and in London, growth barriers hit a six-year peak (88%).

Jo Morris, Head of Insight at Novuna Business Finance said“Some may assume that conflict in the Gulf is a far-away issue that only affects governments and big businesses. Our findings show how quickly and how deeply UK small businesses have felt the impact of rising energy and fuel prices in the UK. Businesses that rely on heavy equipment and transport seem to have felt the impact most significantly – as have those enterprises based in extreme points of the UK, businesses that may have bigger transport and shipping costs.”

“Overall, the that fact four in five enterprises cite factors that are holding back business growth is significant. Actual growth forecasts each Quarter have been relatively static for some time. Whilst the vast majority of enterprises started the year working on new initiatives to secure growth, this is counter-balanced by the very high number that are trying to overcome obstacles and external market pressures. Our tracking suggests that if we want to see a major upturn in UK small business growth forecasts for the summer and autumn months, it is the barriers that need to be tackled first – and urgently. Today’s figures on barriers to growth give us an early indication of what to expect from actual growth forecasts for the months ahead.”

By industry sector, most likely to say that rising energy and fuel prices were material barriers holding back business growth.

• Transport & distribution -58%
• Retail – 45%
• Manufacturing – 41%
• Hospitality – 36%
• Construction – 35%
• Agriculture – 35%