Small businesses — we salute you!

In the recent Autumn Budget, the UK government introduced measures that place additional financial pressures on businesses. Increased employer National Insurance contributions and rising minimum wage obligations mean small businesses face tighter margins, a development likely to affect their growth and employment capacity at a time when they are already managing escalating costs.

Small businesses are the engine of the UK economy. And by small, I mean micro. According to the latest data from the UK government’s Department for Business, Energy & Industrial Strategy businesses with fewer than 10 employees account for approximately 95% of all businesses. These organisations are micro but magical – making an outsized contribution to our collective wellbeing. 

Many have found the past few years tough.

We’ve heard a great deal about the cost of living crisis since Covid. The message from business leaders is that they have been living through a “cost of doing business” crisis. Headline economic indicators like GDP (flat), inflation (tapering down), consumer confidence (yoyoing) give us part of the story. However I’d argue you need a bottom-up view to truly understand what’s going on.

Take a restaurant and bar owner I spoke to this month. I barely started my first question when she finished my sentence then gave me a succinct overview of her last five years of trading, peppered with data on turnover, costs and gross profit. I barely got a word in for the rest of the interview. Opinionated? Yup. Indiscrete? Very. And yet, completely necessary. 

If you were her bank manager you’d not see much of an issue: gross profit was broadly stable. But this masked the actions she’d taken to mitigate rising cost pressures. She was continuously re-engineering her business:

Re-engineering staffing

• Working more hours herself – for example opening, closing and cleaning
• Changing staff rotas – coping with fewer people on each shift
• Hiring younger staff – as their minimum wages are lower

Reducing energy usage

• Getting an electrician to audit power usage
• Setting new schedules for the pizza ovens
• Optimising the temperature of the keg room
• Adding insulation to reduce heating spend

Not to mention reducing other costs by literally putting less cheese on her pizzas… 

All of this imposed a burden on her which went unmeasured in her P&L. The true impact of this cost of doing business crisis was an increasing psychological burden. As she said with a half-smile, “I’m pedalling hard just to stay still”. 

An impressive uptick in adaptive resilience

We spoke to so many UK small business owners who were showing adaptability and determination in the face of mounting challenges. They were constantly course-correcting as they navigate a changing economic landscape. 

Lots of it wasn’t rocket science. Like the yoga studio owner who pivoted to offer a mix of in-person and online classes, expanding her reach beyond her local area. Or the barber who started in-home appointments, tapping into a new market of customers.

What struck me most? The spirit in which they approached these challenges. I was continually impressed by their “can-do” attitude and entrepreneurial zeal. They were finding ways to thrive.

Put simply, the UK’s economic recovery and growth relies on their resilience.

So, to all the small business owners out there, plotting your paths through these challenging times, we salute you. Your tenacity is the very backbone of our economy.