Small business confidence in the UK plunges to levels not seen since the pandemic

The Federation of Small Businesses (FSB) has warned that confidence among UK-based small business owners has dropped to its lowest level since the second Covid-19 lockdown in the fourth quarter of last year.

The Small Business Index headline confidence figure fell to -46 points in the fourth quarter of 2022, down from -36 points in the third quarter and the lowest reading since the fourth quarter of 2020, when it was -49 points.

Numerous small businesses across the nation are struggling due to exorbitant costs, rising utility costs, supply chain problems, and problematic deliveries.

According to the FSB, small businesses engaged in retail or hospitality were among those most severely impacted in the fourth quarter of last year.

This is especially concerning during the "golden quarter" for consumer-facing businesses like shops, bars, and restaurants, according to the FSB.

More concerning is an increasing number of small businesses reported a decline in sales over the previous three months, and their outlook for the months to come remained pessimistic.

About 44% expect to see a fall in revenues in the coming months, while only 29% expect them to increase.

The FSB added that as small businesses struggle to control costs, hiring levels are also suffering.

Nearly two out of five small businesses reported that costs were significantly higher than during the same period last year, as inflation continued to have a significant negative impact on them.

More than three in five small businesses cited utility bills, including energy bills, as the cause of their change in costs.

Additionally, a sizable number of small businesses are still hindered by late payments, with three out of ten small businesses reporting that their payment situation had gotten worse over the previous three months.

The FSB stated that it wants to permanently solve the issue of late payments to small businesses.

It intends to introduce a legal requirement that payment terms and conditions be disclosed in annual reports and hold the audit committees of major corporations accountable for supply chain payment practices.

Small businesses are always the engine room of any economic recovery, but it is critical that they work to create long-term plans to manage their cash flows given the threat of rising costs.

The Virtuous Revenue Cycle (VRC), which is one of the concepts we discuss in our book Let The Cash Flow and consists of eight steps to getting paid on time.

When VRC is applied correctly, it guarantees that you are more accessible to your customers than your rivals and that you are in a better position to identify potential issues with receiving payment on time.

Get more tips on effective cash flow management from our book, Let the Cash Flow. To find out more about how RIABU helps small businesses get paid on time, visit RIABU.com