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The number of small businesses planning to increase prices to their customers is set to rise dramatically this quarter, further fuelling inflationary pressures.
A new quarterly analysis of small business confidence conducted by small business support platform Enterprise Nation has found the number of small firms that say “they must put up prices” has gone up by 11 per cent since the last survey in 2022.
The findings clearly demonstrate the increasing cost pressures businesses are feeling, in contrast to previous Small Business Barometer reports which showed businesses were expecting to swallow the extra costs such as energy.
Overall, 52 per cent of businesses said they planned to put up prices, but firms in the North East are most at risk of price inflation, with 65 per cent saying they planned to raise prices in the second quarter of the year.
Across sectors, general retail, fashion and food and drink are the most likely to say they will increase prices.
More than half of those are raising costs at an average of 10 per cent while a third are set to raise them by up to 20 per cent.
Emma Jones, CBE, founder and CEO of small business support platform and business support provider Enterprise Nation, said: “Small businesses have been holding back since energy costs started to bite last year. Now the competing pressures of inflation, energy and staff costs have proved too much, and they have had to make the difficult decision to increase prices.
“Many small businesses told us they felt costs would have stopped rising by now and had hung on as long as they could.
“Despite all of that, businesses are still supporting their communities. Today more entrepreneurs are being driven by purpose and are giving back through profit share or social enterprises, which is so brilliant to see, especially in these straightened times.”
The Small Business Barometer found more than a third of businesses said sales had fallen due to the cost-of-living crisis. Again, businesses in the North East were hardest hit, according to the analysis with 56 per cent saying sales had dipped, the highest in the UK.
That had a knock-on effect on growth plans for this year, which were downgraded by nine percentage point to 30 per cent over the last quarter together with an increase in the number of businesses expecting to stay the same, which increased by 11 per cent to 44 per cent.
Small firms in the Yorkshire and Humber and North East were most likely to say they would were shelving growth plans this year.
The Small Business Barometer found that the cost-of-living crisis is now considered the biggest challenge small business owners have ever faced, even when compared to Brexit and the Pandemic, rising by eight percentage points to 41 per cent.
According to the Barometer, more than a third (36%) of businesses are started by people because they want to ‘give back’ to their community. That figure was highest in London, where 44 per cent were purpose-driven entrepreneurs. In the North West, 39 per cent and in the South West 37 per cent said they started up to help the community.
A third of small business owners are also holding down another job. The Barometer found 45 per cent of businesses were started as a side hustle, with that rising to 70 per cent in the South East, the highest in the UK. A third of business owners currently (32%) have a full or part time job. Businesses in the education sector (37%) beauty industry (36%) were most likely to say they had a job as well as running their company.