In a recent survey conducted by invoice finance company Novuna Business Cash Flow, involving 500 small and medium sized enterprises, a startling 31% of business owners anticipate the potential closure of their businesses by the end of 2024. This statistic underscores the significance of the forthcoming Spring budget, positioning it as potentially one of the most critical in recent years.
The prospect of numerous businesses facing closure is sobering, a reality underscored by a recent ONS report, showing just 3% of businesses had temporarily halted trading in the month of February 2024, with only 2% having shut down permanently.
The following questions were put to a number of different sized businesses and these are the responses
How likely is it that your business will cease trading by the end of 2024?
- Sole Trader - 12%
- Micro (1-9 employees) - 43%
- Small (10-49 employees) - 34%
- Medium (40-249 employees) - 36%
- Net of all sizes - 32%
Increase in utility bills a key contributor to the drop in profitability, report 32% of businesses
The findings also shed light on the challenges leading to potential business closures. Since the last budget announcement in November 2023, a notable 46% of businesses reported a decline in demand for their products or services as the chief cause of reduced profitability. Closely following this, 32% of businesses are wrestling with the burden of increased utility costs, while 28% are navigating through cash flow pressures.
What are the reasons for the decrease in your business's profitability since the previous budget announcement in November 2023?
- Lower demand for my products or services - 46%
- Increased utility costs - 32%
- Cashflow pressures - 28%
- Increased labour costs - 20%
- Pressure from competitors - 18%
- Costs associated with business growth - 18%
- Investment in new technology - 8%
- Other - 11%
25% of business owners likely to make redundancies by the end of 2024
Despite these challenges, there remains a strong determination among businesses to persevere, with 62% of businesses likely to implement cost-cutting measures to sustain their operations. Nevertheless, such strategies may lead to significant restructuring, including redundancies, which 25% of SMEs anticipate will be necessary by the end of the calendar year.
Half of SMEs surveyed believe the upcoming budget will have no impact on their business's chance of survival.
However, the confidence in the government's ability to address these concerns through the upcoming budget is notably low, with 47% of businesses surveyed expressing scepticism, believing that the government's plans will have no impact on their current predicaments.
The percentage of SME's that think the Spring Budget will have no impact on their business profitability in 2024.
- Sole Trader - 55%
- Micro (1-9 employees) - 38%
- Small (10-49 employees) - 52%
- Medium (40-249 employees) - 43%
- Net of all sizes - 46%
With a significant portion of the business community at risk, the government's upcoming fiscal policies will not only shape the economic landscape but also signal its commitment to supporting the backbone of the economy. The question remains: will the 2024 Spring budget offer the much-needed support to SMEs, or will it fall short of addressing the critical challenges they face?
John Atkinson, Head of Commercial and Strategy at Novuna Business Cash Flow, commented on the recent survey findings, "This survey exposes significant concerns among business owners, particularly highlighting that 28% are grappling with cash flow pressures in these challenging economic times. It underscores the urgent need for a budget that truly addresses the needs of small and medium-sized enterprises. As vital pillars of our economy, known for their innovation, employment opportunities, and growth, their struggles emphasise the necessity for government policy to be closely aligned with their real-world needs. The forthcoming budget presents an invaluable chance for the government to show its commitment to supporting SMEs and, by extension, the broader economy."
For more information, visit Novuna Business Cash Flow's blog page here.
