By Anna Jordan on Small Business UK – Advice and Ideas for UK Small Businesses and SMEs
Businesses are eating through their savings in order to keep them afloat.
Small and medium-sized businesses said that rising costs, falling sales and higher wage bills forced them into using their savings at the end of 2022.
The findings come from a survey by Investec showing that 43 per cent of firms expected to run down their savings in the next six months, with four per cent saying savings will be completely wiped out.
On top of that, higher interest rates will make it more costly for businesses to take out loans in the coming year. Fewer borrowing options will drive some businesses into administration, say Investec.
The Energy Bill Relief Scheme is set to end in March and no announcements have been made for further support at this stage. Business groups have warned that energy costs for firms could double once the scheme ends.
>See also: Energy Bill Relief Scheme – how it works
Investec said that a small number of executives had been able to boost their savings at the end of last year because of faster growth. However, a quarter said that they had been able to grow their savings because they cut jobs or couldn’t find the right staff to fill job vacancies.
Investec estimates that SMEs have an average of £117,000 in their savings accounts, though this varies widely between companies. Around a fifth of companies, particularly firms in high-growth tech industries, said they were using savings to “invest in the growth of their business.”
The Office for Budget Responsibility (OBR) said that business investment is likely to stagnate over the coming years as higher energy costs and economic uncertainty hinder growth.
“SMEs are inevitably feeling the economic strain from rising prices and increases in their energy bills as well as issues with recruiting staff and funding pay rises for their existing workforce,” said Samantha Booysen of Investec.
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The post Small firms forced to use savings to survive appeared first on Small Business UK.
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