Cost Concerns and Staff Mental Health Keeping UK SMEs up at Night

  • Rising internal costs, unprecedented utility bills, and high inflation are top three biggest threats to SMEs this year
  • 15% of SMEs also concerned about mental health of their workforce
  • Worryingly, 21% haven’t taken any steps to mitigate these concerns

With inflation and interest rates continuing to escalate, the unprecedented costs of keeping the doors open is revealed to be the challenge that is of most concern to UK SMEs according to new research from solution-led fintech provider, Nucleus Commercial Finance.

The findings revealed that the top three biggest threats to SMEs in the year ahead are high levels of inflation pushing up internal costs (staffing costs, rent, utilities etc) (40%), unprecedented utility costs (37%), and high levels of inflation pushing up external costs (supply chain etc) (35%).

The findings also highlighted that people focussed issues remain a notable concern as business owners look to chart a path through 2023 and beyond. Around one in seven (15%) SMEs identified the mental health of their workforce (15%) as one of their top three threats. More than one in ten (12%) cited the shallow talent pool to hire from, and one in ten cited the mental health of the senior team (10%). In addition, 9% stated that the physical health of the workforce (9%), ‘quiet quitting’ of employees (8%), and the physical health of the senior team (7%) were of equal concern this year.

Looking at the steps being taken to address the known and looming business threats, more than one in five (21%) admit that they have taken none. Of those that say they have, it is increasing the price of products/ services (26%) that is the steps cited by the plurality, 17% say they are relying on switching utility/ service provider to help mitigate the impact while 13% of SMEs say that they are focussing on upskilling their employees.

Top steps being taken to mitigate the impact of biggest business

Increasing the price of our products/services26%
Switching utility/ service providers17%
Up-skilling our employees13%
Encouraging more flexible working (flexi- shift patterns, remote working etc)12%
Freezing staff wages12%
Delaying planned investment in tech/ infrastructure12%
Shelving growth ambitions12%

But, despite being clear on the threats ahead, there is very clearly a mitigation gap. While a quarter (25%) of SMEs say ’the mental health of the workforce’ is one of the top 3 biggest threats for the year ahead – 11% identified it as the top threat. But just 7% of SMEs are giving employees the option to take ‘mental health days, and just 4% are increasing staff perks.

Chirag Shah, CEO and Founder of Nucleus Commercial Finance commented: “UK SMEs are looking aghast at the storm clouds overhead – fully aware of the challenges posed by the year ahead. While rising costs are typically top of mind, it is notable that we are seeing such heightened awareness of mental health and a recognition of the importance of people in building, sustaining, and growing a business.

“But addressing all these challenges requires a financial safety net – something that too few businesses are in a position to build. Some can be delayed or simply patched for the short-term. But, for those issues deemed business critical, it is imperative that finance providers are at hand. By being able to rapidly and accurately assess requests, and then deliver the appropriate financing, they can help ensure that SMEs are in a position to thrive when the sun finally comes out.”

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