Give small firms help now or thousands will go bust

The future for Britain’s small and medium-sized companies could not be bleaker. Having made it through Covid lockdowns, many are being driven to the brink of extinction as a result of soaring energy costs, rising inflation and the cost of living crisis. 

Small businesses, from all sectors – restaurants, retailers, hairdressers and manufacturers – are facing huge hikes in their energy bills this autumn. Many are likely to have to deal with other challenges, such as falling customer numbers, late payments and higher rents. 

Business groups are calling on the Government and the new Prime Minister, announced tomorrow, to act before thousands of businesses go to the wall. 

The Federation of Small Businesses says that inaction will spell the end for many good companies. 

Most small businesses are excluded from the household energy price cap and lack the negotiating power of larger companies to get a better deal from their supplier. 

Martin McTague, chairman of the federation, says: ‘Eye-watering energy bills could be the final nail in the coffin for many small businesses as they struggle to get through the winter.’ 

His views are echoed by trade association UKHospitality. It is warning that thousands of pubs and restaurants face collapse this winter. 

Chief executive Kate Nicholls says: ‘More must be done to help businesses that are at risk of failure through no fault of their own. Immediate Government intervention in the commercial energy market is essential.’ 

Business groups are laying out a list of demands for the new Prime Minister. They include a cut in VAT and business rates; help with energy bills, including the introduction of an ’emergency energy grant’ for small businesses; and a reduction in National Insurance bills. 

The cost of living crisis is also impacting small businesses when it comes to cashflow. 

The time it is taking customers to pay bills is on the rise, leading to many business owners having to forgo salaries or dip into personal savings to bridge the gap. Emma Jones, founder of small business support platform Enterprise Nation, says: ‘Being paid late is not only a headache, it means people have to spend hours chasing invoices when they could be working and making money.’ 

Chris London runs his own Nottingham-based marketing agency, managing social media accounts for businesses including accountants and funeral directors. 

He issues 80 invoices a month and now finds himself chasing late payers. ‘We’re seeing more of our customers paying late,’ says Chris. ‘Cashflow is a huge issue for us as we have our own costs to pay. I must pay my staff, so sometimes I am having to dip into my own savings to make ends meet.’ 

Chris currently has £3,000 of outstanding invoices. ‘It’s a constant battle,’ he says. 

‘We give our customers 14 days to pay and while some are brilliant, others always pay late.’ 

Art director Vicky Simmons is founder of Mean Mail, an award-winning greetings card company based in Leyton, East London. 

Her cards are amusingly sarcastic and jokey, but she finds chasing late payers no joke at all, and they are having a massive impact on cashflow. 

Vicky has six invoices currently outstanding and recently had to wait 14 months for an Australian publisher to pay its £3,500 bill. Vicky now uses a third party to deal with late payers while in her business terms and conditions she states she has the right to charge 8 per cent interest plus the bank base rate if a payment is late. 

‘It forced two stockists into paying immediately,’ she says. ‘My invoices range from £100 to £500, so we’re not talking big numbers, but if 15 of them are not paid promptly that has a huge impact on my business. You live and die by your cashflow.’ 

Enterprise Nation’s Jones has words of advice for small businesses. 

She says: ‘Before entering into a new business agreement, it’s worth making inquiries into the payment history of the firm, even if it’s anecdotal. Businesses must also be clear on their payment terms and [like Mean Mail’s Simmons] be prepared to charge interest for late payment.’