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Posted: Thu 25th May 2023
The number of small businesses planning to increase prices for their customers is set to rise dramatically this quarter, further fuelling inflationary pressures.
A new quarterly analysis of small business confidence by Enterprise Nation has found the number of small firms that say they must put up prices has risen by 11% since the last survey in 2022.
The findings clearly demonstrate the increasing cost pressures businesses are feeling, in contrast to previous Enterprise Nation Small Business Barometer reports which showed businesses were expecting to swallow the extra costs such as energy.
Overall, 52% of businesses said they planned to put up prices, but firms in the North East are most at risk of price inflation, with 65% saying they planned to raise prices in the second quarter of the year.
Across sectors, general retail (76%), fashion (72%) and food and drink (67%) are the most likely to say they will increase prices.
More than half of those (59%) are raising costs at an average of 10% while a third (32%) are set to raise them by up to 20%.
Emma Jones CBE, founder and CEO of 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 (39%) 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% 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% over the last quarter together with an increase in the number of businesses expecting to stay the same, which increased by 11% to 44%.
Small firms in the Yorkshire and Humber and North East were most likely to say they would were shelving growth plans this year (both 56%).
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%.
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According to the Enterprise Nation Small Business 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% were purpose-driven entrepreneurs. In the North West, 39% and in the South West 37% said they started up to help the community.
A third of small business owners are also holding down another job. The Small Business Barometer found 45% of businesses were started as a side hustle, with that rising to 70% 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.
Lynsey Bleakley, Enterprise Nation member and founder of Bumble & Goose bespoke bakery, is based in Belfast.
She said:
"As a small luxury bakery using fine ingredients, we've been hit by rising costs. An example is one of the butters that we use has increased from 80p to £2 a unit.
"Unfortunately, we've had to pass some of the cost on, with slight price rises of around £1 on our gift boxes of personalised biscuits and luxury brownie gift boxes. We'll also cut back on advertising to reduce costs. But it's a fine line as consumer spending is down with the huge rises in cost of living.
"We're in the virtual hug/luxury gifting market, and as consumers have less money to spend, we've added a range of products at a lower price point, while still maintaining our quality. Customers can still send hand-baked treats to friends, family and colleagues as times get tighter. As a small business, it's essential to adapt and pivot as the market changes."
Sadia Yusuf, founder of Elephant Chilli Sauces Co, is based in Bristol.
She has had to put the cost of her sauces up by around 20%. Sadia said:
"The costs of the spices in my sauces and manufacturing costs generally have gone up. I use cinnamon, tamarind and cloves as well as fresh chillies in my sauce range and the prices have shot up due to inflation.
"I have raised the cost of a 160g bottle from an initial £1.10 to £1.80 and then to £2.20. I make a very small margin and I give 5% of all profits to an elephant charity near where I was brought up in Kenya – so if I didn’t put up my costs, I wouldn’t make anything at all."
Mum-of-four Sadia, who makes products in her own home kitchen that are inspired by the flavours of her childhood upbringing in Somalia and Kenya, plans to sell to wholesalers and via St Nicolas Market in Bristol in the summer. She said:
"I know donating to the elephant charity is effectively a cost, but I wanted to demonstrate kindness and generosity to my children. It’s a big thing when you can give back in some way and it’s an important life lesson."
