Financial stress causing sleepless nights for UK SMB owners

A new survey conducted by Dext has revealed that financial stress is severely impacting the sleep patterns of small and medium-sized business (SMB) owners in the UK.

The research, which gathered insights from 500 SME leaders and 100 accountants and bookkeepers across the UK, found that 33% of SMB owners are losing sleep over the ability to pay staff. In addition, 44% are kept awake by cash flow concerns, highlighting the financial pressures faced by these business owners.

Rising costs are expected to further strain these businesses. The research anticipates a GBP £42,000 annual increase in employment costs due to rises in the National Minimum Wage. This figure is based on an average salary bill of GBP £625,000 and includes an anticipated 6.7% rise in the national living wage to GBP £12.21 per hour, set to take effect from 1 April.

SMB owners have cited rising salary expenses (43%) and tax liabilities (39%) among their top five cash flow worries. These concerns are compounded by the upcoming National Insurance (NI) contributions increase of 1.2%, alongside a reduction in the NI threshold from GBP £9,100 to GBP £5,000. However, businesses will see a rise in the employment allowance from GBP £5,000 to GBP £10,500, potentially offsetting some of the additional costs.

Commenting on the findings, Sabby Gill, Chief Executive Officer at Dext, expressed concern over the financial burden these changes might entail for SMBs. "For SMB owners, cash flow is already a major pain point in even the most steady economic period but as the data indicates, the prospect of increasing labor costs is inflicting an unprecedented burden on entrepreneurs. With the Spring Statement approaching, we urge the Government to use this as an opportunity to introduce meaningful support for SMBs to successfully navigate already challenging conditions, rather than drive more change that will negatively impact growth," he said.

"There's a limited influence SMB owners hold over the fiscal shocks which may come their way this month however, they are in control of how they respond to them. Now more than ever, they must be proactive in planning for a host of different scenarios, leveraging every resource at their disposal - from real-time financial information to digital tools - to ensure they're not only agile in their decision-making, but well-informed," added Gill.

The survey also refers to a poll conducted by the Federation of Small Businesses (FSB) in Q4 2024, indicating that a third of companies expect to reduce their workforces in response to rising staff costs, nearly double the figure from the previous quarter.

Amid an economic climate where government policies aim to address an estimated GBP £40 billion tax shortfall and tackle the UK's cost-of-living crisis, businesses are advised to stay vigilant in their financial strategies.