We won’t survive,’ UK businesses say

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Amid political uncertainty and ahead of the Autumn statement, new research from FreeAgent, the cloud accounting software company, reveals that almost a quarter (23%) of SMEs believe the UK economy has been irreversibly damaged by Brexit and/or Covid-19 – with an astonishing 64% of business owners saying they fear their business will not survive the next 12 months.

The research reveals a disparity of opinion between business owners and accountants regarding the UK’s current and future political and economic outlook. The vast majority of accountants (62%) and just under half (45%) of SMEs believe they are in about the same or worse situation under Rishi Sunak’s government, despite the popular belief that he would provide greater certainty. However, 1 in 5 SMEs (22%) believe their business is much more likely to survive now that Sunak is Prime Minister (compared to just 7% of accountants).

The research also highlights key issues and challenges facing business leaders and accountants – and provides the government with important insights into what SMEs and accountants want to implement in the fall statement.

Political uncertainty wreaks havoc on SMEs

When this survey was first conducted in mid-October (when Liz Truss was Prime Minister), a combined 28% of accountants and small business owners thought economic pressures would ease in 3-5 years . That figure has now risen to 38% following the disastrous mini-budget of previous Chancellor Kwasi Kwarteng and the subsequent election of Rishi Sunak as leader.

The biggest jump in pessimism came from accountants, with almost half (50%) now believing that economic pressures will take 3-5 years to ease. That’s up from 38% when Liz Truss was in power. With that in mind, the results suggest some small business owners are more optimistic about Mr Sunak’s economic plan, with 28% believing economic pressures will ease in 1-2 years, compared to 22% under Liz Truss’ leadership. .

Ongoing economic pressure cripples businesses

The research also highlights the number of businesses struggling to survive in the current economic climate, with the majority fearing they won’t survive beyond next year. While tax cuts could lead to a healthier job market for accountants and geographic expansion for SMEs, more than a third (37%) of accountants and 22% of SMEs say they would use any future tax cuts announced by the government just to stay afloat.

Nearly 2 in 5 survey respondents (37%) say they are not convinced that the government will intervene to support businesses facing an economic environment on the verge of a long recession. In fact, 64% of business owners fear they can only survive the next 12 months, while only 16% of business owners think they will stay open indefinitely. Almost one in three accountants (30%) think their firm will only survive next year, with 10% expecting to remain solvent for only six months.

Similar issues plague accountants and business owners
Accountants and business owners are currently grappling with significant economic and political issues, with Covid and Brexit in particular having a major impact. In addition, inflation, finding the right staff and rising energy bills are all cited among the top pressures for accountants and SMEs, although accountants are also grappling with the impact of shutdowns and businesses are struggling due to ongoing supply chain issues. .

Despite the need to find and retain the right staff, 26% of accountants have implemented hiring freezes, almost a quarter (24%) of SMEs have cut benefits due to the cost crisis life, and 25% discontinued training programs. However, only 12% of accountants sacrificed staff training, highlighting their need to develop their staff and stay compliant. In a nod to valuing machines more than humans, SMBs and accountants would rather cut benefits (23% average) than cut technology spending (11% average).

Differing views on a chaotic economic situation
The research also highlighted divergent views among SMEs and accountants on what will help the current economic situation. Looking to the future, SMEs want the government to expand the energy cap to cover small businesses (43%), introduce new government loans specifically for energy bills (37%) and introduce a tax outstanding on energy/fuel companies (33%). Accountants, on the other hand, agree that a windfall tax (43%) would be the most useful thing for the government to introduce, alongside expanding the energy cap (41%) and introducing reductions on government-imposed bills (34%).

Some government policies, such as the implementation of new tax legislation in the form of Making Tax Digital (MTD) – a key part of the government’s plans to make it easier for businesses to get their tax right and keep control of their affairs – is seen as positive, with very few (6%) suggesting its complete cancellation. However, there has been criticism from both sides for the lack of clarity in government communication, with 50% of respondents citing this as the biggest issue around MTD.

Roan Lavery, CEO of FreeAgent said: “Our research paints a rather gloomy picture of the UK economy from the perspective of accountants and SME owners. It is therefore imperative that the government creates a resilient environment where small businesses can not only survive but also grow. The The fact that the majority of those we surveyed think their business will fail in a year should be the wake-up call for our decision-makers to act now, before it’s too late.

Yogesh Dhanak, Senior Technical Advisory Manager at ACCA said: “For too long, small businesses in this country have struggled with access to finance, staff retention and a changing tax landscape that can only be exacerbated with the Chancellor’s fall statement. Our members are rightly worried about the future of their businesses and their customers’ businesses and we support all measures designed to ease the burden on the millions of UK SMEs who are already struggling with inflationary rises and exorbitant energy.

Julia Kermode, Founder of IWORK said: “We are about to enter one of the toughest economic environments in recent times and small businesses, sole traders and the self-employed are more at risk than ever. Protecting these workers is essential to safeguard the wider UK economy and it is essential that action is taken before further macro-economic pressures push these groups further into the red.Small businesses and the self-employed hold the key to economic recovery – not Failure to support these dynamic and enterprising individuals will only worsen the crisis.

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