[UK] 1 in 4 SMEs could struggle to meet payroll this April

A survey has revealed that more than 1 in 4 (26 per cent) UK SMEs will struggle to meet rising payroll costs in April as a result of an upcoming health and social care levy increase in NI contributions in addition to rising minimum wage rates, Accountancy Today reports.

The monthly SME Recovery Tracker from ACCA and The Corporate Finance Network (CFN) polls accountancy professionals on the financial outlook of their SME clients. Recent results suggested that mounting financial pressures - such as surging inflation at 5.4 per cent, interest rate rises of 0.25 per cent to 0.5 per cent, heightened supply chain issues, the energy crisis, complications getting access to finance, and now the social care levy - are the cause of “severe interruptions” to business operations and SMEs’ ability to survive or grow.

ACCA reportedly said many UK SMEs are at “breaking point”, as accountants believe that more than 1 in 5 (21 per cent) small businesses will run out of cash in the next 12 months. It said Welsh SMEs paint a “particularly bleak picture” about the current strains on small businesses. The survey found they are experiencing the COVID squeeze most intensely with almost half (47 per cent) expecting to run out of cash in the next year. By contrast, Scottish small businesses are the most optimistic with only 7 per cent predicting they will run out of cash.

In addition, the survey found that over a third (35 per cent) of accountants report that their SME clients are “feeling more stressed and anxious than usual”; a 15 percentage point increase from levels before Christmas.

The amount of clients experiencing a decline in their mental health has more than doubled to 17 per cent since the pre-Christmas survey and the rates of those who aren’t sleeping (16 per cent) and feeling unable to cope (6 per cent) have also doubled in the last two months.

The survey did, however, find that over a third (38 per cent) of UK SMEs are “hopeful” about growth ambitions in the next six months. Scottish SMEs are the most positive about their growth potential in the first half of 2022, with this figure rising to 1 in 2 (50 per cent) SMEs. Although the findings demonstrate an appetite for growth, it said two thirds (68 per cent) of UK SMEs are not aware of finances available to them.

Claire Bennison - head of ACCA UK - said, “Our research reveals a very uncertain start to the new year for SMEs, countered with optimism about the long term for 2022. However, this essential progress can’t be achieved without the cashflow and people to help them grow, or indeed the resilience to do this too.

“With more than 1 in 4 (26 per cent) UK SMEs anticipated to struggle to meet payroll in April, the government needs to seriously consider the economic implications of the planned hike in National Insurance rates and the impact it will have on UK SMEs who serve as a backbone to the UK economy. Ultimately, these figures point to the danger of businesses failing.”

Source: Accountancy Today

(Links and quotes via original reporting)

A survey has revealed that more than 1 in 4 (26 per cent) UK SMEs will struggle to meet rising payroll costs in April as a result of an upcoming health and social care levy increase in NI contributions in addition to rising minimum wage rates, Accountancy Today reports.

The monthly SME Recovery Tracker from ACCA and The Corporate Finance Network (CFN) polls accountancy professionals on the financial outlook of their SME clients. Recent results suggested that mounting financial pressures - such as surging inflation at 5.4 per cent, interest rate rises of 0.25 per cent to 0.5 per cent, heightened supply chain issues, the energy crisis, complications getting access to finance, and now the social care levy - are the cause of “severe interruptions” to business operations and SMEs’ ability to survive or grow.

ACCA reportedly said many UK SMEs are at “breaking point”, as accountants believe that more than 1 in 5 (21 per cent) small businesses will run out of cash in the next 12 months. It said Welsh SMEs paint a “particularly bleak picture” about the current strains on small businesses. The survey found they are experiencing the COVID squeeze most intensely with almost half (47 per cent) expecting to run out of cash in the next year. By contrast, Scottish small businesses are the most optimistic with only 7 per cent predicting they will run out of cash.

In addition, the survey found that over a third (35 per cent) of accountants report that their SME clients are “feeling more stressed and anxious than usual”; a 15 percentage point increase from levels before Christmas.

The amount of clients experiencing a decline in their mental health has more than doubled to 17 per cent since the pre-Christmas survey and the rates of those who aren’t sleeping (16 per cent) and feeling unable to cope (6 per cent) have also doubled in the last two months.

The survey did, however, find that over a third (38 per cent) of UK SMEs are “hopeful” about growth ambitions in the next six months. Scottish SMEs are the most positive about their growth potential in the first half of 2022, with this figure rising to 1 in 2 (50 per cent) SMEs. Although the findings demonstrate an appetite for growth, it said two thirds (68 per cent) of UK SMEs are not aware of finances available to them.

Claire Bennison - head of ACCA UK - said, “Our research reveals a very uncertain start to the new year for SMEs, countered with optimism about the long term for 2022. However, this essential progress can’t be achieved without the cashflow and people to help them grow, or indeed the resilience to do this too.

“With more than 1 in 4 (26 per cent) UK SMEs anticipated to struggle to meet payroll in April, the government needs to seriously consider the economic implications of the planned hike in National Insurance rates and the impact it will have on UK SMEs who serve as a backbone to the UK economy. Ultimately, these figures point to the danger of businesses failing.”

Source: Accountancy Today

(Links and quotes via original reporting)