Revealed: The top 10 impacts of inflation on small businesses

Over a third of small business owners (34 per cent) owners have had to increase customer costs as they grapple with inflation, according to new research by London based SME lender iwoca.

Having to raise prices is the top impact of inflation on small businesses, with the number of SMEs doing so increasing since December 2021 (from 26 per cent).

This is followed by SME owners having to dip into their pockets to bolster their businesses; over a quarter are using their own personal savings to help their companies survive inflation. This is followed by one in five who say they had to stop paying themselves a salary.

The new data shows inflation is impacting an increasing number of small businesses: in December 2021, 41 per cent of SMEs said the rising inflation rate wasn’t affecting their business. Now, only 17 per cent say they’re unaffected by it.

Using savings is third on the list, but in 8th and 9th position there are even some business owners using retirement and inheritance money to survive inflation; one in 20 SMEs (5 per cent) are having to use their inheritance as inflation rises, and similar amounts (6 per cent) are turning to their pension pots.

Cory Greenhough, managing director of an online commercial refrigeration and catering equipment company, Fridge Freezer Director, said: “It’s really sad to think, but at this current rate, I think in a year’s time a lot of businesses, say your local gastropub in the country, won’t have survived this energy crisis.

“In the past people have just thought about the cost of the piece of equipment, not the electricity they’ll need to run it. So now we’re now trying to educate customers about the most energy-efficient products they can buy.”

The top 10 SME inflation impacts are as follows:

1. Increasing costs for their customers (34 per cent)
2. Using their own personal savings (26 per cent)
3. Stopping paying themselves a salary (18 per cent)
4. Not being able to focus on growing their business due to increased operating costs (15 per cent)
5. Not being able to afford supplies (14 per cent)
6. Applying for a small business loan (10 per cent)
7. Borrowing money from friends/ family for their business (8 per cent)
8. Dipping into their pensions pot (6 per cent)
9. Using their inheritance (5 per cent)
10. Closing their business temporarily (4 per cent)

Seema Desai, COO at iwoca, commented: “Our data shows that one third of SMEs have raised their prices and over a quarter are having to touch their savings. The support which the Government has promised is much needed to help prevent small business closures.”

By Matthew Neville – Correspondent, Bdaily

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