Number of Small Businesses closing hits new high

Number of Small Businesses closing hits new high

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Small Business closed

The number of Small Businesses choosing to voluntarily close has reached a new high. The the long-term impact of coronavirus restrictions, rising energy prices and concerns over imminent tax increases is hitting small business owners.

A record number of 14,526 businesses in Britain voluntarily appointed liquidators last year, according to data obtained by accountant Price Bailey.

This represents a sharp 7 per cent increase on the previous record set in 2020, when 13,590 companies voluntarily appointed liquidators. Just under 10,000 businesses opted to close in 2019.

The Government’s vast support packages for small businesses, including the furlough scheme and bounce back loans, during the pandemic put many British SMEs on life support. But as life is returning to ‘normal’  many of the harsh realities still exist such as Small business late payment and rising energy costs.

The Government has announced National Insurance and dividend tax rates are due to increase by 1.25 percentage points from April 2022. Accounts firm Price Bailey says this  may well prompt further voluntary liquidations for many Small Businesses in the UK.

Inflation and increased energy bills

Inflation and rising energy bills present another significant challenge to small businesses.

A survey of 577 senior staff working in UK SMEs by Barclaycard reveals that while the majority of businesses predict an increase in revenue this quarter, concerns over inflation mount.

The latest ONS figures show the headline CPI rate crept up to 5.5 per cent in January from 5.4 per cent the previous month.

Just under two thirds of the UK’s small businesses are worried about the cost of living crisis and inflation, while 39.4 per cent say rising inflation will impact their ability to remain competitive.

Ever rising costs have also prompted 9.5 per cent to reconsider the need for a physical retail outlet.

SME leaders now view the rising cost of living as a bigger headwind than any pandemic uncertainty, while a tenth of those surveyed consider inflation as the number one challenge for this year.

Jo Fairley, co-founder of Green & Blacks and an SME Investor said: ‘The strong start to the year for British small and medium-sized businesses, who are looking forward to an average anticipated uplift of 13.5 per cent in earnings over Q1, is really great news.

‘But it comes at a time where two thirds of SMEs are also acutely aware of the challenges posed by the rising cost of living, inflation and energy bills – potentially a perfect storm.

‘From my own experience running multiple ventures, I know all too well that trying to weather economic turbulence while growing a business can be daunting on top of the day-to-day fire-fighting.

‘Nevertheless, the last couple of years have shown that the British consumer is keener than ever before to support smaller and local businesses, and this should prove really positive for SMEs, helping them not just to cope but go grow in the months ahead.’

We recently reported about the upsurge in Small Businesses hiring debt collection agencies as many SME’s struggle to survive in the current climate.

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