Half of UK small businesses are operating under capacity due to high costs and staff absences, according to research.
The survey conducted by the Federation of Small Businesses (FSB) found 55 per cent of small firms out of the 1,200 surveyed are operating below capacity and almost half do not expect growth this year.
The rising cost of operations has been confirmed by a record 87 per cent of companies compared to the same period last year, with fuel, utility costs and rising tax contributing to the increase.
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The manufacturing and retail sectors have seen the biggest hit to their operations as supply chain disruption continues to be volatile.
One positive finding from the survey was the FSB’s measure of business confidence increased from the last quarter of 2021, although the metric of 15.3 points was still 12 percentage points from the same period last year. This means more small business owners are expecting an improvement to their commercial performance.
This confidence differs starkly by industry, however. Businesses in the food, communications and accommodation industries reported positive readings, while the hospitality and retail industries reported negative readings. Retail sales dropped by 1.4 per cent in March, according to the ONS.
FSB national chair Martin McTaguesaid:“It’s encouraging to see small business confidence back in positive territory, though the picture across sectors is distinctly mixed.
“The small business community shrank in size to the tune of hundreds of thousands over the pandemic. With Covid numbers now falling, this needs to be the summer where we start to reverse that trend – policymakers should be doing all they can to facilitate and encourage start-ups and side hustles.
“The message from us to consumers, policymakers and corporates alike is clear: let’s make this a small business summer – backing the 99 per cent on which our recovery will depend.
“As things stand, spiralling costs are eroding small business margins at a rate that many have never experienced before, whilst workplace absences are making it hard to operate at full capacity in a tight labour market.”
See also: Half a million jobs in small businesses at risk