Inflation concerns and fears of soaring energy prices are weighing heavily on businesses despite government promises to cover some of the costs, according to new research.
For half of small businesses, fuel and energy costs remain their top concern according to a survey by business finance platform Tide, conducted in late September.
Businesses, charities and public sector organizations will be protected over the next six months through the Government’s Business Relief Scheme which offers businesses a reduction on their bills.
It is expected to cost around £29bn over the period and will be followed by more targeted support thereafter.
But many companies remain hesitant about whether they will benefit from government policy measures amid widely reported turmoil in financial markets.
More than 70% of small business owners said the Chancellor’s Mini Budget – which unveiled sweeping tax cuts to boost economic growth – had failed to boost their confidence, Tide said.
Almost a third of small businesses in Scotland, of the 128 surveyed, said they were considering closing due to cost of living pressures, a stark sign of the growing burdens on small businesses.
Businesses have also been hit by falling consumer confidence which for many companies has already led to reduced sales as cash-conscious households cut spending.
In September, business output fell to its lowest level since February 2021, according to a separate report by accounting and business advisory firm BDO.
This means there was a decline in the amount of goods and services produced during the month as businesses struggled with a combination of falling demand and supply constraints.
A combination of higher energy costs, the falling value of the pound and inflation in material costs led to a drop in production, indicating a recession, BDO said.
These challenges are having a domino effect for businesses with optimism falling for the sixth consecutive month and businesses slowing their hiring plans.
Kaley Crossthwaite, Partner at BDO, said: “A fall in output, optimism and employment is a wake-up call for the economy, and there is likely to be further turmoil ahead. come.
“With energy prices expected to accelerate inflation towards the end of this year and unemployment rates expected to peak in mid-2023, we are only just beginning to see the effects of the recession set in.”
Ms Crossthwaite added that it is clear that businesses are “at an impasse” and will need further reassurance that they will receive the appropriate support in the difficult months ahead.