The Biggest Challenges Faced by UK Small Businesses in 2021
What a year 2021 is going to be. Not only are small business owners attempting to come to terms with how Brexit will affect their trade, but they are also still having to get to grips with the after-effects of the COVID-19 pandemic. Two sizeable problems.
The UK Transition to Trading with the EU
Although it has now been five years since the result of the Brexit referendum, small business owners are still unaware of what the new trading regulations are, and what if anything, they can do to navigate their way around particular issues.
In February of this year, the UK Government announced a £20 million SME Brexit support fund. It is designed to help SMEs to adjust to things, including new customs procedures, rules of origin, and VAT rules when they trade with businesses in the EU. Small business owners can seek advice regarding the UK transition from the Federation of Small Businesses.
The Effects of the COVID-19 Pandemic on SMEs
It has been over a year since the Coronavirus outbreak began decimating social and economic life. Although we are approaching the light at the end of the tunnel, we all have to adjust to the new normal.
A survey of small business owners reveals that 19% are worried about Brexit rules and regulations, while 35% are concerned about Coronavirus restrictions. It’s a confusing picture, with 51% of SME owners wondering how best to move ahead in the current political situation.
Taking both major incidents into account, here is what small business owners are predicting for themselves and their enterprises:
29% will be thinking about shutting their businesses down
- 20% are expecting their operations to make a loss
- 20% will be looking to sell their businesses
- 18% say their company will struggle
- 10% think their trade will remain level
- 8% believe their business will grow
Slightly more encouraging is the fact that 34% of SME owners think they are agile enough to make the necessary changes to circumnavigate what lies ahead.
The Financial Difficulties SMEs Face
Poor cash flow is a problem that over a quarter of small businesses are experiencing due to late payment of their bills and invoices, blamed on the pandemic.
In many instances, the situation is so bad that owners of small companies have, on average, dipped into their personal savings to the tune of £7,000 to keep members of staff employed and their businesses afloat.
Research further shows that approximately one-third of these owners sacrifice their salaries to pay employees during the pandemic, with 50% giving up their holidays, 41% sacrificing their bonuses, and 30% not taking any dividends.
It means that many business owners in this category have been affected when it comes to investing money towards their retirements. Such lost opportunities can have a significant effect on the final value of their pension savings. If you find yourself in this position now, you should consider talking to a wealth management specialist to review your options.
Seeking Alternative Solutions and Introducing New Technology
Recent research undertaken by SumUp, a company specialising in the supply of card readers and payment solutions found that 51% of SMEs have been forced to change their operations one way or another over the past year. Many have introduced options such as remote payment, gift cards, and online store vouchers.
According to the survey taken over 2,800 businesses, two-thirds of SME owners said they had to apply for government financial support, 11% did not receive aid, while 73% felt that the support they were given wasn’t enough to cover their financial losses.
The Move Toward Cashless Transactions and a Cashless Society
A study undertaken by Merchant Machine, a company that specialises in the supply of complete EPOS systems, PDQ machines, payment gateways, and virtual payment terminals, predicted that banknotes and coins could be obsolete in the UK by the year 2026, as the COVD-19 pandemic accelerates the journey towards a cashless society.
The measures taken due to the pandemic have seen both shoppers and retailers nationwide choosing to use e-wallets and card payments rather than cash in an effort to limit personal contact and slow transmission of the virus.
62% of small business owners advised that turning to cashless payments had proved beneficial.
Small Businesses Adopt New eCommerce Models
In the challenging circumstances in which we find ourselves today, many small businesses have adopted new eCommerce models.
Some have created new revenue streams, and over one in ten hospitality businesses have set up outdoor environments, with 13% saying they will continue to use them after the pandemic has subsided. There has also been a significant move towards digitising communications with customers across all business sectors.
Another recent survey determined that 31% of small business owners intended to keep the changes they had introduced in place permanently, with 22% of respondents being confident that their new ways of working would transform their outlook in 2021.