Small companies anticipate that the effects of inflation and cost of living will be worse than Covid-19 or Brexit, according to the most recent Small Business Monitor from WorkLife by OpenMoney.
The cost-of-living problem and rising inflation, according to 64 per cent of businesses, is expected to have the most impact on their long-term business growth, according to the study of 750 senior financial and HR decision makers at SMEs.
This contrasts with just 22 per cent who anticipate Covid-19 to have the most impact and 11 per cent who think Brexit would have the greatest impact. Overall, SMEs expect rising costs to be their biggest stressor in the upcoming year, with energy and fuel prices and other inflationary pressure ranking the highest at 37 per cent. Helping employees handle the growing cost of living was highlighted by 22 per cent as a top issue.
The study found that nearly a third, or 32 per cent, of the SMEs WorkLife spoke with wanted to find suppliers with more affordable goods and services, while the same number planned to raise the price of their own goods and services. This suggests that there may be more hardship ahead for Brits who already have trouble paying for basic necessities.
Alternatively, 23 per cent of top SME decision-makers are delaying their intentions to invest in the company in the upcoming months, while 12 per cent intend to completely abandon plans. A sizable minority’s intentions include discontinuing office use and scaling back the company to eliminate certain office space.
The research also found that smaller businesses want to increase salary and benefits in one in six cases while 14 per cent want to give employees longer hours. But 16 per cent of respondents are considering cutting the number of hours that employees work, 12 per cent are considering not paying bonuses, 11 per cent are considering lowering compensation, and 10 per cent are considering not providing salary increases.
In order to support SMEs, 40 per cent of SMEs think that a reduction in the VAT rate or a VAT relief programme is necessary. A similar number believe that tax relief on employee perks would be helpful in supporting the options they can provide to assist their personnel.
WorkLife by OpenMoney managing director Niamh McLaughlin says: “After two years of uncertainty brought about by the pandemic, the cost-of-living crisis has created yet another hurdle for small businesses to overcome. But despite deep concerns decision-makers have over these issues, once again they have risen to the challenge and are adapting to overcome their impact.
“Though it’s concerning to see the threat of redundancy and pay cuts lingering for some workers, it’s encouraging to see the number of firms who have focused their response to rising inflation and bills on employee needs, rather than simply trying to cut back costs or claw back the additional outlay.
“Offering targeted rewards and support now could have a significant impact on long-term motivation and loyalty, especially for those firms whose operating costs will be hardest hit and may not be able to afford pay increases or bonuses.”
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