Small businesses are concerned about an increase in cost of labour, rising debt and the long-lasting impact the pandemic will have on their bottom line, new data revealed.
A survey by insurance company AXA UK and the Centre for Economics and Business Research showed that high levels of debt accumulated during the pandemic is the most common worry for small business owners, with 24% of SME decision makers concerned.
Some 18% are worried that the pandemic will have resulted in lasting changes to consumer behaviour, and the same percentage are afraid that more restrictions could be implemented by the government due to COVID or other diseases in the future.
A similar percentage have said the rising cost of labour will likely be a challenge.
Some 19% of businesses are worried about continued weak domestic demand for their goods or services.
Despite their worries, though, SMEs have said they look forward to welcoming customers back and to making the most of new opportunities from technology and new ways of working post-pandemic.
New ways of working, including remote working, are seen as an opportunity for growth by 27% of SMEs.
A fifth of those surveyed believe that new technology will bring further efficiencies in the near future. New domestic clients and the chance for expanded local business figured in 26% of answers.
In the retail and wholesale sectors, larger SMEs have continued to be efficient during the pandemic. Despite making up 46% of total sector employment in 2020, they contributed 52% of turnover, likely due to shifting focus to online selling.
With customers returning to stores, they should be in a strong position to make the most of pent-up and new demand, the report said.
"The findings of our report demonstrate the extraordinary resilience, perseverance and motivation that drives the owners and leaders of these businesses, and they give us cause for optimism as we work together to make the most of the opportunities and face the challenges to come," said Deepak Soni, director of commercial, AXA UK.
SMEs make up 99.9% of all UK businesses and together they contributed £2,273bn ($3,135bn) towards the UK economy in 2020 — over half the country’s total turnover, AXA said.
Meanwhile, the average monthly number of new businesses starting up has declined across the country, sitting at -1.1% during the pandemic, when compared to 2019.
This drop is perhaps lower than expected and shows that rather than being put off by the economic uncertainty caused by the pandemic, many people may have used it as an opportunity to start a business, or been forced to do so following redundancy, the report said.
The report showed that the national business survival rate stands at 42.5%. Regionally, London has seen 41% growth in total SME numbers since 2010. However, an SME based in London has the lowest regional five-year business survival rate (39%) in the country.