Rising costs and less funding: The challenging market for UK SMEs


Rising energy bills – A breakdown of the prices of business energy in the UK (2020-2022)

Electricity ElectricityGasGasGas
Year/QuarterSmall/medium businesses (p/kWh)Average rate (p/kWh)Small businesses (p/kWh)Medium businesses (p/kWh)Average (p/kWh)
2020 (Q1)14.8913.662.342.32.41
2021 (Q1)14.1914.
2022 (Q1)19.3818.143.333.983.95
Source: GOV.UK     

Recently, there have been significant changes in the rates businesses have been quoted for gas and electricity as unlike residential properties, there is no price cap. Wholesale prices are at a record high for companies, which is having a knock-on effect on consumers who are having to pay through the roof for these necessities.

At the beginning of 2022, SMEs paid an average of 19.38p per kWh for electricity – slightly more than the average. This is an increase of 37% since the same period in 2021 (14.19p per kWh).

The cost of travel 

Around half of all train fares in England and Wales have increased by up to 3.8% in March 2022the biggest price hike in nine years

Public transport fares in London also experienced an increase of 4.8% in March 2022, meanwhile, driving saw fuel costs reach an all time high in 2022. UK motorists are currently paying an average of £1.75 per litre for unleaded and £1.85 per litre for diesel

The full list of five expert tips can be found here.

Less than HALF of all small business loan applications approved amid cost of living crisis 

The business statistics report found that successful finance applications amongst small businesses have been plunging in 2022. Fewer than one in ten (9%) small businesses applied for finance in the first quarter of 2022. Of this small proportion, only 43% had their applications approved. This is just half of the application success rate recorded  from Q3 2020 to Q4 2021, in which eight out of 10 (85%) small businesses had their applications approved.

Why companies are securing finance in Q1 2022

Use of credit by businessManage cash flowInvest in equipmentExpansion of businessRecruitment
% of responses42%21%9%4%

When it comes to using credit, 42% of the companies that managed to secure finance in Q1 2022 plan to use it to manage cash flow. This is relatively low when compared to 81% who secured finance for this reason in Q4 2021. 

Only 21% of businesses plan to use credit to invest in equipment, with 9% utilising funds for expansion, and just 4% for recruitment in Q1 2022. This suggests that many small businesses across the UK are struggling with the ever-growing cost of living crisis and rising inflation rates.

Driven by post-pandemic changes to small businesses’ debts and lack of business investment, Bank of England figures show that demand for lending has eased. The annual growth rate of lending to SMEs is at a record low, despite small businesses making net debt repayments totalling £65.7billion in 2021. This is  an increase of 14% from 2020 and 19% higher than 2019–and close to £1 billion in March 2022 alone.

To conclude, James Andrews, senior personal finance expert, said: “2022 has been a hectic year due to the cost of living crisis and inflation rates reaching a record high, so it comes as no surprise that SMEs have been struggling this year. Research from the beginning of the year shows that, of those businesses securing finance, 4 in 10 plan on using it to manage cash flow problems.

In this challenging environment, it is important that businesses are aware of how to monitor their finances efficiently. In addition to shopping around for energy suppliers and speaking to a specialist regarding rent costs and potentially considering the move to a remote workplace, there are various government grants that businesses can apply for – including travel costs.”