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Cost of living

25 October 2022

Cashplus Bank data shows cost of living pinch for UK micro businesses as costs begin to wipe out higher revenues

25th October 2022: New data from Cashplus Bank, the leading digital SME bank shows rapidly increasing costs are putting pressure on micro businesses across the UK, with strong gains in SME income over the past 12 months now wiped out by even faster rising expenses. By analysing income and spending data from its 150k SME customers, Cashplus has been able to build a picture of the “cost of doing small business” in the UK today. 

Since the start of 2022, businesses have faced growing costs for energy, fuel, recruitment, and other basic needs. Cashplus data shows that many micro-SMEs have performed strongly over the last 12 months, but that recent inflationary trends have seen growth in costs outpacing growth in income.

  • Over the 6 months August 2021 to February 2022, small business income and outgoings were broadly flat
  • Outgoings began to rapidly increase after February 22 and by August were up 21% year on year. Income also increased strongly over this period, growing at 25%
  • However, this trend has now reversed and over the six months from March-September income grew by 8% but was outstripped by cost growth at 10%, with 0.8% growth in outgoings vs a 1% drop in income from August to September

Cashplus has also analysed the areas in which small businesses are facing the biggest increases in cost.

  • The biggest spend for businesses is across retail and wholesale. Year-on-year volumes are up 26% and spending is up 21%
  • The second biggest spending area is in building supplies. Year on year this has volumes are down 2% and spending is up 7%
  • Companies are spending on average 37% more on motor fuel since the beginning of 2022
  • Following covid 19 disruption, transport costs have seen a noticeable uptick. Across air, rail and road, year-on-year spending increased by 94%
  • Likewise in hotels and accommodation, there was a year-on-year 43% increase and 14% in restaurants and bars
  • While it represents a small percentage of overall costs, spending on training and education has also increased by 23% year on year again following the impact of covid 19

Rich Wagner, CEO, Cashplus Bank said: “While the micro business population is diverse and varied, it’s obvious that this vital part of the UK economy is feeling the squeeze of the cost-of-living crisis. Small businesses will be seeing margins under real pressure as basic, unavoidable day-to-day costs increase, meaning otherwise-healthy businesses will be tipped into lossmaking. With added uncertainty over energy costs from April next year, many small companies will be deeply concerned that the cost of doing business will become unmanageable.”

National Chair of the Federation of Small Businesses (FSB), Martin McTague, said: “The cost of doing business crisis is biting hard, driven by energy bills, fuel prices, rising input costs, increasing labour costs, and high taxes. Our own research shows that from spring through summer nearly nine-in-ten small firms were reporting higher costs. We’re also seeing growing numbers of small businesses seeking finance to help with cashflow. Without further support in the coming months to ease the soaring costs, there is a real danger that we will see more previously healthy and strong small businesses struggling to make ends meet.”

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