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Home Business SMEs feeling the pinch thanks to red-hot price growth – WorkLife Small Business Monitor  

SMEs feeling the pinch thanks to red-hot price growth – WorkLife Small Business Monitor  

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– More than a third (36%) of SMEs cite high inflation as one of the top three challenges facing their  business over the next 12 months. 

– 34% of SMEs are looking at increasing the cost of products and / or services for customers. Some  31% are exploring cheaper means of sourcing goods needed to run the business. – 1 in 5 (18%) small businesses said they were putting plans to invest in the business on hold due to  rising inflation, while 13% were scrapping investment plans altogether.  

25 April 2022 

High inflation is by far the biggest challenge on SME’s minds over the next 12 months, WorkLife’s  latest Small Business Monitor has revealed.  

More than a third (36%) of smaller firms WorkLife engaged with cited inflation as one of the top three  challenges facing their business over the next 12 months. Following this were a range of other  operational concerns, including supply chain complexities (22%) and rising business rates (22%).  People management issues were also high on the agenda, with looking after employee wellbeing  (22%) and sourcing and recruiting quality talent (20%) also being cited as pertinent challenges. 

Much further down the list were slowing consumer demand (14%), geopolitical risks (13%), and other  financial issues such as getting access to loans or over drafts (12%) and paying back Covid-19 support  loans (11%).  

With so many SMEs feeling the pinch from sky-high inflation, it is possible prices could rise even  further for consumers. More than a third (34%) of SMEs say they will be looking to increase the cost 


of products and / or services in the face of rising inflation, while a similar number (31%) were exploring cheaper means of sourcing goods and services needed to run the business. 

The research found that SMEs’ investment plans could also be hit hard. Almost a fifth (18%) of  respondents said were putting plans to invest in the business on hold due to high inflation, while 13%  were scrapping investment plans altogether.  

For some employees, redundancies or cuts to working hours could be on the horizon. While 1 in 10  (10%) of firms expected to lay off staff as a result of rising inflation, the same number (10%) said they  were looking at reducing hours. Some 7% were looking at reducing salaries and benefits, but it’s not  all doom and gloom, with 11% of firms expecting to expand pay and rewards. 

Despite the threat of inflation, there is a significant uplift in optimism regarding income when  compared with previous waves of the research. Almost 4 in 10 (39%) SMEs expect revenue to increase  in the next 12 months, compared with just 26% in Summer 2021. A lesser number (31%) of firms  expect it to reduce, while 25% predict income will remain at the same level. 

Niamh McLaughlin, Managing Director of WorkLife by OpenMoney, commented: “While there is clear  positivity from SMEs in terms of business income, the outlook remains very unclear two years on from  the first UK lockdown. Not only are smaller businesses feeling the effects of rising prices and bills,  they are also grappling with issues such as supply chain constraints and labour shortages.  

“Particularly for firms being forced to put investment plans on hold, it’s of upmost importance to  ensure any available budget is being allocated to the areas that will have the biggest impact on the  overall health of the business. How employers help staff manage the impact of inflation on their own  finances could well impact their decision to stay and strive to support the company long-term, so a  robust pay and benefits strategy is certainly not an area to be overlooked right now.” 

WorkLife’s Small Business Monitor is based on research carried out by 3Gem among 759 senior  financial and HR decision makers in UK SME companies with 5 – 250 employees. Fieldwork for the  Spring report took place between 9-17 March 2022.