Inflation concerns and fears of surging energy prices are taking a heavy toll on businesses despite the UK Government’s pledges to cover a proportion of costs.
For half of small businesses, fuel and energy costs remain their biggest concern, according to a survey from business financial platform Tide, conducted at the end of September.
Businesses, charities and public sector organisations will be protected over the next six months with the government’s business relief package which provides companies with a discount on their bills.
It is expected to cost around £29bn over the period and will be followed by more targeted support afterwards. But many businesses remain hesitant about whether they will benefit from the policy measures, amid turbulence in the financial markets.
More than 70% of small business owners said the Chancellor’s mini-budget - which unveiled sweeping tax cutting measures to stimulate economic growth - had not boosted their confidence.
Almost a third of small businesses in Scotland, out of the 128 surveyed, said they are considering closure due to cost-of-living pressures in a stark sign of the mounting burdens on smaller firms.
Businesses have also been hit by waning consumer confidence which, for many firms, has already led to a reduction in sales as cash-conscious households cut back on spending.
In September, business output fell to its lowest level since February 2021, according to a separate report from accountancy and business advisory firm BDO.
This means that there has been a slump in the amount of goods and services produced during the month as businesses battled against a combination of falling demand and supply constraints.
A combination of higher energy costs, the sinking value of the pound and cost inflation across materials has caused output to shrink, indicating a recession, BDO stated.
These challenges have a domino effect for businesses with optimism falling for the sixth month in a row and companies slowing down their hiring plans.
Kaley Crossthwaite, a partner at BDO, said: “A fall across output, optimism and employment is a stark warning sign for the economy, and it’s likely that there is further upheaval ahead.
“With energy prices expected to accelerate inflation towards the end of this year and unemployment rates set to peak in mid-2023, we are only just starting to see the recessionary impacts set in.”
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