Small businesses at ‘breaking point’ due to ‘crippling’ inflation rates
The Consumer Price Index, including owner occupiers’ housing costs (CPIH) rose by 7.8% in the last 12 months to April 2022, up from 6.2% in March, according to figures released today (18 May 2022) by the Office of National Statistics.
The largest upward contributions to the change in the CPIH 12-month inflation rate between March and April 2022 came from housing and household services (1.27 percentage points), restaurants and hotels (0.11 percentage points), and recreation and culture (0.10 percentage points), with the largest partially offsetting downward contribution from clothing and footwear (0.09 percentage points).
Simply Business chief executive, one of the UK’s largest providers of small business insurance, Alan Thomas commented: “Small business owners are at breaking point – feeling the crippling pressure of rising costs, energy and fuel prices.
Feeling the pressure
“With inflation at a 40-year peak, small to medium enterprise (SME) owners, particularly sole traders and micro businesses, will feel the pressure of paying more for products and materials. At the same time, consumer purchasing power is going down, meaning SME owners could be hit with a decrease in revenue.”
The largest upward contributions to the annual CPIH inflation rate in April 2022 came from housing and household services (2.76 percentage points, principally from electricity, gas and other fuels, and owner occupiers' housing costs) and transport (1.47 percentage points, principally from motor fuels and second-hand cars).
What’s more, on a monthly basis, CPIH rose by 2.1% in April 2022, compared with a rise of 0.7% in April 2021.
Thomas believed high inflation was squeezing small business owners while many were still in a crucial recovery period.
“The eye-watering cost of Covid for SME owners, including lost work, earnings and loan repayments, now sits at a total of £109.6bn according to one of our recent surveys,” he said.
Concerns for the future
He continued: “One in six also believe they will never recover financially from the pandemic. As a result, two in five (46%) SMEs are calling for long-lasting financial support from the government to help them get back on their feet after Covid.”
“Accounting for over 99% of all UK businesses and contributing trillions of pounds in turnover every year, Thomas believed small businesses sat at the heart of our communities and were vital to the economy.
Ultimately, he wanted to hear more from the government on its plans to support and act for the sake of UK small businesses.
“Put simply,” he concluded, “if the UK is to recover from the effects of the pandemic, and to avoid the recession the country is heading for, we need small businesses to bounce back.”
