While the FSB chairman, Martin McTague, applauded the chancellor Rishi Sunak's latest support for consumers through the £15bn cost of living package announced last week, he said some of those recipients could lose their jobs unless the government rolled out targeted measures for their employers.
"We don't have any problem with the way the chancellor dealt with consumer needs," McTague told BBC Radio 4's Today programme. "But there is still a massive problem with small businesses. They are facing something like twice the rate of inflation for their production prices, and it's a ticking timebomb. They have got literally weeks left before they run out of cash and that will mean hundreds of thousands of businesses, and lots of people losing their jobs."
McTague pointed to figures from the Office for National Statistics, which showed that 40%, or 2m, of the UK's small businesses had less than three months' worth of cash left to support their operations. Of those 2m, the FSB chairman said about 10% - or 200,000 - were in "serious trouble", and that another 300,000 "have only got weeks left".
He said: "It is a very real possibility because ... they don't have the cash reserves. They don't have any way they can tackle this problem."
McTague cited one case in which a hotel owner in Scarborough had the profits wiped out by soaring energy bills, which were five times their normal levels. "They weren't able to trade any longer without essentially trading at a loss and therefore damaging the future of their business and everybody that worked for them."
Consumer price inflation hit 9% in April, the highest level since 1982. Costs have been driven higher by a jump in energy bills, record petrol prices and the rising cost of a weekly shop. The Bank of England has estimated inflation will peak at about 10% later this year.
Comment: It's interesting the BoE would say that, because just 2 weeks ago the Governor of the BoE also warned of looming 'apocalyptic' global food shortages; it doesn't sound like a situation where inflation will simply peak and then conditions will return to normal.
Businesses have also faced soaring costs, with factory input prices increasing by 18.6% over the past year, a record high. Many firms are raising their prices in response, feeding into inflationary pressures across the country. On Monday, the tool and equipment rental firm Speedy Hire confirmed it had raised its prices in April to "offset the effects of cost inflation". However, it warned that profits could be hit if customers were resistant to the price rises.
McTague said that without further support, the expensive emergency assistance used to keep businesses afloat through the Covid-19 pandemic would effectively be wasted.
"The chancellor spent approximately £45bn making sure those businesses survive the Covid crisis," the chairman said. "Are we seriously expecting him now to abandon them just as they've managed to get through one crisis and effectively lose that money for the taxpayer?"
Three-quarters of small- and medium-sized UK companies are worried about the long-term impact the cost of living crisis, soaring energy bills and rising inflation will have on their business, according to Barclays' SME Barometer, released on Monday.
Reader Comments
The genuine businesses that provided some community cohesion have already died during covid, as expendable income dries up, people will not be visiting or needing all these "other" type "family businesses" that were forced in amongst our own and previously had the advantage of Marxist funding ideology, these money laundering shop fronts that took but offered nothing to the local communities are now struggling, mainly because expendable income is now not affording people these pointless quasi services anymore or requiring their poisons and criminal attachments.
Look at any highstreet in the smaller towns and cities and you will know exactly what "family businesses" they are.
They won't be missed. It's not like your losing your family butchers, bric a brac shops or your family delicatessen, they were killed off years ago. Its more like losing 3 of the 6 "identical" shops no one ever wanted (or needed) that sprung up during the last 10 years.