As we move into a new world without covid restrictions, you’d be forgiven for wondering why small businesses aren’t singing from the rooftops and heaving a huge collective sigh of relief says Paul Foster
Development Manager, Federation of Small Businesses .
There is no doubt for most businesses the last two years have been horrendous and many are thankful still to able to trade, so difficult were conditions as lockdowns were introduced and consumer confidence nosedived.
Many businesses successfully pivoted and found a new niche while others battened down the hatches and just about managed.
The reality is though that while everyone is pleased that we have finally seemingly come through the pandemic, the scars will take a long time to heal. Many businesses are worried about how and when they will be able to pay back their covid loans and deferred payments on rent, and just when you thought we might have a period of quiet where we can gather our thoughts and plan for the future we see inflation rocketing up.
Price increases in most walks of life have been palatable for many years now, and we have grown accustomed to benchmarking things price-wise, confident in our ability to understand costs and mitigate against small rises through prudent planning.
The obvious exceptions have been in property and at the petrol pumps where prices always seem to go up faster than in other areas.
Small businesses are now starting to see big increases in their energy bills, while staffing costs have also increased as a shortage of workers has pushed up the cost of labour.
Many businesses are now reviewing their pricing strategies in light of these growing costs, which will inevitably mean their prices will need to rise too, and so the cycle goes on, or at least there’s the risk that inflation continues to spiral.
The usual Bank of England response to such conditions is to tighten up on lending, increasing interest rates to try to curtail spending. Doing this now though risks hitting those debt-laden small businesses with a double-whammy of higher costs of doing business coupled with higher loan repayments.
Perhaps this is why our latest small business surveys show a higher than expected level of business concern about the future.
It’s a tricky conundrum to solve for the policy-makers, but one they need to get right if we are to have any prospect of economic growth in the near future.
