Four fifths (81 per cent) of business owners are worried about recession, with small business confidence taking a hit as the nation’s 5.5 million small firms face an array of challenges heading into 2023.
A new report from Small Business Britain and TSB Bank has found that concerns about the economy is deterring small businesses from investing in growth, innovation and hiring new talent. However, the report also points to many sources of business opportunity and a determined fight back from the nation’s small business community, with over half of small businesses (52%) signalling that they are experiencing challenges, but pressing on anyway.
The report, which looks at how small businesses can return to growth, underlines the grit and resilience that now characterises Britain’s small business community, as they deal with perpetual change following the pandemic and cost of living crisis.
Over a fifth of small businesses (22%) say Brexit has impacted their business negatively, and 29% of firms have reduced operational spend to respond to difficult conditions. However half have continued to adapt by adding on new revenue streams.
“Small businesses continue to face hugely turbulent times, and many are exhausted from dealing with constant challenges,” said Michelle Ovens CBE, founder of Small Business Britain.
“While the prospect of recession is causing much anxiety, there is still a lot of opportunity for small businesses in the UK to drive economic recovery and we need to help them grow in confidence and optimism with tools to help them focus on growth and success.
“Waiting for the ideal market conditions is broadly futile in a world that keeps changing as we have seen over the last three years. Businesses need a model for operating that can survive and thrive during turbulent times.”
Small Business Britain has launched a guide to help businesses grow during a recession, with identifying new routes to market and focusing on export opportunities identified as key tactics for small businesses to cope with a flat UK market.
"Growing a niche food product during an economic downturn is challenging, as consumers can be cautious with their spending and less likely to try new or specialty items,” said Delight Mapasure, founder of K’s Wors, a South African speciality sausage producer.
“This has led us to focus on exploring new opportunities via export markets and we have entered the Middle East and have talks at an advanced stage with India. Being able to reach new customers is vital for us, and other small businesses, to develop, reduce risk and have greater resilience.”
Focusing on digital skills is also highlighted as a priority for growth. The report found that 52 per cent of small businesses have not sharpened technology skills in the last year, and 64 per cent have not been investing in technology tools.
Adeel Hyder, Business Banking Director at TSB Bank said: “There’s no getting away from the fact that the last few years have been tough for many small businesses. The next twelve months will bring further challenges as costs continue to make an impact, and a potential economic downturn is forecast. Despite this, I believe there are many reasons to face the future with optimism.
“It is very often small businesses that lead the way out of a recession, and there are good reasons for that. Small businesses tend to have closer relationships with their customers and partly because of that, they are often better placed to anticipate and adapt to changing needs in the economy. It is clear from the experience of the last few years, that challenges can very often be accompanied by fresh opportunities”.
Small Business Britain’s ‘How to Grow’ report shares a detailed growth plan for entrepreneurs in 2023 and is available to download for free at https://smallbusinessbritain.uk/how-to-grow
