The cost of living crisis means half a million small businesses have 'weeks left before they run out of cash', according to an expert. Although the Chancellor's £15bn package of support for consumers is a positive, Martin McTague - the chairman of the Federation of Small Businesses (FSB) - has warned that employers need a helping hand to keep people in work.
Speaking to the BBC's Today programme on Radio 4, Mr McTague was careful to praise the Chancellor help package. However, he added: "But there is still a massive problem with small businesses. They are facing something like twice the rate of inflation for their production prices, and it’s a ticking timebomb.
"They have got literally weeks left before they run out of cash and that will mean hundreds of thousands of businesses, and lots of people losing their jobs. It is a very real possibility because … they don’t have the cash reserves. They don’t have any way they can tackle this problem.”
He cited Office for National Statistics (ONS) figures on small businesses which operate with in the UK. Mr McTague said the figures, which show 40%, or two million, have cash to keep going for less than three months.
The FSB chairman said around 10% of those are facing “serious trouble”, with another 300,000 having “only weeks left”. Mr McTague mentioned a Scarborough hotel which had seen its profits wiped out by energy bills.
“They weren’t able to trade any longer without essentially trading at a loss and therefore damaging the future of their business and everybody that worked for them," he added.
Energy bills, petrol prices and rising food costs are all contributing to financial strife in the UK, with consumer price inflation hitting 9% in April. It is likely to peak at 10% later this year, according to the Bank of England
Mr McTague told BBC Radio 4: “The chancellor spent approximately £45bn making sure those businesses survive the Covid crisis. Are we seriously expecting him now to abandon them just as they’ve managed to get through one crisis and effectively lose that money for the taxpayer?”
Barclays’ SME Barometer, released today (Monday) say 74% of SMEs - smaller firms - say that rising living costs, energy bills and inflation are long-term concerns with more than half fearing rising costs will hit consumer spending and a quarter (28%) believing it will make them less competitive as they are forced to increase prices, reports The Express.
