Hundreds of thousands of small businesses may fold this year – wiping £12bn from economy, report says
Hundreds of thousands of the UK’s smallest businesses risk going under this year as costs keep rising, a report has revealed.
The owners of nearly one in eight microbusinesses, defined as employing fewer than 10 people, fear they will have to fold, equating to 630,000 businesses.
Catherine Sweet sells art for a living – both her own and that of other artists – via her website BobCat Gallery and at exhibitions she puts on.
Small business owner Catherine Sweet
But she says “a massive decline in consumer spending” coupled with rising living costs is a disaster for businesses.
“I know that my business could grow fivefold If I had a physical space, but every negotiation I have entered into with the landlord has come to nothing because I do not have the funds right now.
“Affordable rent subsidies for retail premises would be a huge boon, because for businesses like mine, having physical premises would be a game changer, but it’s completely out of our reach,” she said.
And Catherine is not alone.
The annual Venture Forward study by website builder GoDaddy found that only a fifth of microbusiness owners think the government is doing enough.
More than three quarters also described the cost of living crisis as the greatest challenge they’ve ever faced, with the price of energy the biggest single concern.
According to Andrew Gradon, GoDaddy’s UK manager, microbusinesses represent 96% of all businesses within the country’s private sector.
“They are the lifeblood of businesses in the UK and it’s them that are on the frontline very much feeling the direct impact of the cost of living crisis,” he said.
“Around 42% said that they wanted support with tax incentives but also looking more broadly to business support – so looking at technical assistance for business development as well as support for digital strategy.”
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The study estimates that if the 12% of microbusinesses under threat went under, it would wipe £12bn from the economy.
The data also shows that the cost of living crisis is having a disproportionate impact on microbusinesses owned by underrepresented entrepreneurs.
A total of 85% of black entrepreneurs described it as the worst time they can remember, as did 84% of those who are Asian compared with 75% of white entrepreneurs.
A government spokesperson told Sky News: “We recognise that companies are struggling with energy bills which is why the government is providing businesses with billions of pounds of support.
“This support means some will be paying around half of predicted wholesale energy costs this winter. We’ve pledged further energy support from April onwards.”
UK drivers are “confused” by the country’s electric car transition, ministers are being warned.
Although most drivers are not hostile towards electric vehicles (EVs), many are confused about what changes are coming and when, according to new research from the AA.
In a survey of more than 14,000 AA members, 7% thought the government was banning the sale of used petrol and diesel cars.
Around a third thought manual EVs exist, despite them all being automatic.
More than one in five said they would never buy an EV.
The government’s plan for increasing the number of electric vehicles being driven in the UK focuses heavily on increasing the supply of the vehicles.
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What you can do to reach net zero
In 2024, at least 22% of new cars and 10% of new vans sold by each manufacturer in the UK had to be zero-emission, which generally means pure electric.
Each year, those percentages will rise, reaching 80% of new cars and 70% of new vans in 2030.
Manufacturers will face fines of £15,000 per vehicle if electric vehicle sales fall short of 28% of total production this year.
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By 2035, all new cars and vans will be required to be fully zero emission, according to the Department for Transport.
Second-hand diesel and petrol cars will still be allowed to be sold after this date, and their fuel will still be available.
There are more EVs – but will people buy them?
In February, 25% of new cars were powered purely by battery and in January, they made up 21% of all new cars registered in the UK.
But despite the growth of electric sales, manufacturers continue to warn that the market will not support the growth required to hit government EV targets, and called for consumer incentives and the extension of tax breaks.
The AA suggested the government’s plan focuses on “supply but does little to encourage demand for EVs”.
It called on ministers to co-ordinate a public awareness campaign alongside the motoring industry which directly targets drivers who doubt the viability of EVs.
“Our message to government is more needs to be done to make EVs accessible for everyone,” said Jakob Pfaudler, AA chief executive.
Which? head of consumer rights Sue Davis said: “When it comes to making sustainable choices such as switching to an electric car, our research shows that people are often held back by high costs, complex choices or uncertainty.
“The government needs to provide the right information on electric vehicles and other sustainable choices so that people have the confidence to switch.”
A Department for Transport spokesperson said: “We’re investing over £2.3bn to help industry and consumers make a supported switch to EVs.
“This includes installing a public charge point every 28 minutes, keeping EV incentives in the company car tax regime to 2030, and extending 100% first-year allowances for zero-emission cars for another year.
“Second-hand EVs are also becoming cheaper than ever, with one in three available under £20,000 and 21 brand new models available for less than £30,000.
“We’re seeing growing consumer confidence as a result.”
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