Consumers Are Cutting Back — and Small Firms Are Paying the Price

Festive Spending Slump Signals a Tipping Point for Britain’s Small Businesses

If you talked to anyone about their spending over the festive period you will have expected the gloomy retail sales figures we’ve seen this morning. Non-food sales were down when compared to last year and we spent less on gifts. Food sales were up by a measly £15 on last year and given that food inflation is at around 4.8% the additional spend is due to rising prices.

There seems to be a feeling that any organisation with the word ‘business’ attached has deep pockets and can keep paying out. For the 99.6% of the UK’s businesses that are small or micro that simply isn’t the case. Those are the businesses that traditionally provide the services consumers are willing to pay for, create the jobs, innovate, and employ half of the private sector workforce. We need those businesses, on and off our high streets, to thrive because they contribute not only a huge amount to the economy but pay for everything from children’s playgrounds to local charity events and even some of the debt advice so many consumers are in need of.

A survey from Barclays that shows people put less spending on their cards this year and around two thirds are determined to cut their grocery spending this year as well as discretionary spending such as clothes and meals out. That is telling and given the rise in demand the debt advice charities are reporting, it’s likely that people are determined to reduce their debt rather than add to the debt pressure they’re already feeling. For consumers the tipping point has been reached.

What does all this mean for the shops on our high streets? Pubs and other hospitality businesses are feeling the pinch and worried about the impact of rising business rates as are other businesses with property. And it’s not just on our high streets that we’re seeing the impact. Consumers have less money to spend despite Government efforts to put more money into the pockets of workers partly because smaller businesses are tightening their belts in the face of increases in wages, bills and National Insurance Contributions, and the looming employee rights changes.

There were signs that confidence is not quite as low as it was but that is likely to waver again in the face of poor sales figures. The signals from the construction and manufacturing sectors are weak. I hear time and again from people thinking of and even making plans to move their businesses abroad, or to invest in opportunities outside the UK.

We have to make the UK a great place to start and do business in, The opposite is currently the case. Small and micro businesses have to be heard and we have to rebuild from the ground up. We’re losing our most important small businesses and we do so at our peril.