The short answer is yes, but let’s delve into a little more detail! As part of the Savanta Business Tracker, we asked 1000 businesses around the UK in June 2023 regarding the impacts and effects of rising inflation rates on their business.
The findings were that 77% of the total businesses reported that the rising inflation rates in the UK have had a negative impact on their businesses. And a significant 90% of total businesses reported that responding to economic downturns and recessions, the rising costs of living, and rising inflation, are their priority.
The increasing rates of inflation in the country appear to be particularly impacting micro-businesses (<10 employees), with 84% reporting a negative impact on their business and 46% reporting a significantly negative impact, whereas 66% of other small businesses (50-249 employees) reported a negative impact to their business.
In overall, 89% of small businesses (<250 employees) believe that the inflation rate in the country will continue to be a challenge for their business, with 38% viewing the rising UK inflation rates as a significant challenge.
Almost two-thirds (63%) of small businesses also reported that the inflation rate has a negative impact on their turnover, and, additionally, 71% of micro-businesses responded that there has been a decline in their weekly income. A similar proportion of micro-businesses also reported a decline in demand for the overall services that they provide (67%).
When we turn to break down the reasons for the impact of rising inflation, small businesses reported that the associated rising energy prices (42%), rising fuel prices (31%), maintaining profits (33%), and a drop in customer demand (31%) are the most significant challenges that their businesses are facing in the current climate. All these aspects are even more challenging to micro-businesses (51%, 44%, 39% and 35% respectively).
Given all these difficulties, 76% of micro-businesses and 69% of small businesses in overall agree that the rising business costs and the cost-of-living crisis warrant a ‘big state response’, such as prominent action and intervention by the government.
Business sizes appear to play a vital role in their confidence in their ability to manage the country’s rising inflation rates, such as by mitigating the impact on customers and business costs. Only 49% of micro-businesses report being confident, whereas 58% of small businesses and 69% of medium and large businesses (250+ employees) reported their confidence in their ability to manage the effects of rising inflation.
Though, for small and micro businesses, the outlook appears gloomy, with only around a third of micro-businesses (34%) expecting that the business will grow in the next 12 months compared to 44% of medium and large businesses, there is greater optimism in other areas. Roughly half of small businesses in the IT, technology and communications sectors (48%) are expecting growth in their industries by next year.
As the Government and the Bank of England continue to grapple with managing inflation rates, we can see that all businesses are continuing to be impacted by inflation rates, with the pinch being particularly felt amongst micro and small businesses. With the UK inflation rates starting to decrease, hopes are running high. Our ongoing Business Tracker will closely monitor how businesses of all sizes and industries perceive this change and its impact on their confidence.
- For more insights into what this means for your business, contact us at [email protected] or click here to find out more about our Business Tracker.
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