Insight & Analysis

Press release: ONS: firms are becoming more financially vulnerable amid the cost-of-living crisis

Published: Oct 2022

20th October 2022

  • This month 41% of businesses reported they had either no cash reserves (13%) or had three months or less (28%).
  • This is the highest percentage reported since late June 2021.
  • More than a third (35%) of businesses reported this month that economic uncertainty was having the biggest impact on their turnover.
  • This is up from the 28% of businesses who reported this challenge in early July 2022.
  • This comes amid other research from the ESRI showing Brexit has amplified problems facing some British businesses.
  • Its research show trade flows from the UK to the EU are 16% lower than if Brexit had not happened.

The ONS Business Insights and Conditions Survey is used to inform policy decisions, about issues impacting UK businesses and the economy and highlights increasing business uncertainty.

https://www.ons.gov.uk/businessindustryandtrade/business/businessservices/bulletins/businessinsightsandimpactontheukeconomy/20october2022

Research from the indicates Brexit impact on trade

https://www.esri.ie/news/brexit-reduced-overall-eu-uk-goods-trade-flows-by-almost-one-fifth

Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown: “Amid soaring borrowing costs, volatile energy prices and ongoing supply chain issues, problems are piling up for businesses across the country, putting them in a much more financially vulnerable position. The number of firms facing precarious future is at the highest level since June 2021, as the country was emerging from pandemic-ravaged times. In early October, 41% of businesses reported they had either eaten through all their cash reserves (13%) or had just three months less (28%).

With government fiscal policy being ripped up within weeks and a mini-financial crisis ripping through markets, more businesses are caught in the crossfire. More than a third (35%) are now reporting that economic uncertainty is having the biggest impact on their turnover. This is up from 28% of firms reporting this issue in early July. Businesses are not just having to navigate higher rates of interest for any loans they take out, but their customers are clearly becoming more cautious, as worries about recession rise and the cost-of-living crisis escalates.

The limited government support for businesses in the form of a temporary cap on energy bills, has not significantly assuaged worries about escalating costs. With firms facing eye-watering rises in bills next year, the issue is front and centre of bosses’ minds, and is likely to be keeping many, in the hospitality sector in particular, awake at night. Energy prices remain the top reason businesses are considering raising their prices in November 2022, with 39% of trading businesses reporting this. The accommodation and food service activities industry reported the largest proportion, at 75%. Pubs bars and restaurants are facing the triple whammy of customer belt tightening, the lure of cheaper home entertaining and higher input costs across the operations.

Amid all of this uncertainty, the report from the Economic and Social Research Institute showing that Brexit had amplified the problems facing UK businesses will be a bitter pill to swallow. The research indicates that trade from the UK to the EU is 16% lower than if Britain had stayed in the Union. Even though there has been a recovery from the sharp fall experienced in early 2021, trade is still well below levels that would have been expected if it had performed on a comparable level to other partners. The hangover from Brexit is still clearly taking its toll, just at a time when British business needs it the least.”

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