London, UK – A significant majority of small business owners across the United Kingdom are poised to increase their prices within the next year, according to a new report highlighting the mounting financial pressures facing the sector. Data from the Simply Business 2025 SME Insights Report reveals that 74% of small business owners anticipate raising prices over the coming 12 months.
This widespread decision is primarily driven by a confluence of escalating operational expenses, a growing tax burden, and pervasive uncertainty surrounding consumer spending. The report paints a challenging picture for UK firms, indicating that less than half expect to see growth in their turnover in the forthcoming year. This outlook suggests that many businesses are being compelled to ‘batten down the hatches’, a cautious stance that the report warns could stifle economic growth.
The Weight of Rising Costs
The core issue forcing businesses to adjust pricing structures is the sharp increase in their running costs. This was identified as the single biggest challenge by the small business community surveyed for the report, cited by 22% of respondents. These expenses include everything from energy bills and supplies to rent and wages, all of which have seen significant upward movement.
Compounding the pressure from direct running costs is a tighter tax burden. Businesses are navigating a complex and often increasing array of taxes and contributions, which further erode their margins and necessitate passing on costs to customers.
Uncertainty in the Market
Beyond internal cost pressures, businesses are also grappling with external market volatility. The report highlights that lack of/uncertain consumer demand is the second-most significant challenge, identified by 20% of small business owners. An unpredictable economy, cited by 16%, and persistent rising inflation, mentioned by 13%, contribute to an environment where planning and forecasting are increasingly difficult, adding another layer of risk to their operations.
These factors collectively create a challenging operating environment where absorbing higher costs is no longer feasible for many small enterprises, leaving price increases as a necessary measure for survival.
Defensive Strategies Impacting Investment
In response to the prevailing economic headwinds and financial constraints, many small businesses are adopting defensive strategies focused on cost containment and risk reduction. These measures, while essential for short-term viability, carry potential implications for future growth and dynamism within the sector.
The most common adaptive measure reported is holding off on buying new equipment, a step being taken by 42% of businesses. This indicates a reluctance to invest in productivity improvements or technological upgrades that could be crucial for long-term competitiveness.
Furthermore, 23% of firms are opting to reduce marketing spend. While understandable in a tight budget environment, this can hinder efforts to attract new customers or retain existing ones, potentially limiting future sales opportunities. A significant portion, 22%, are delaying expansion or hiring new employees, signaling a pause in growth plans and contributing to slower job creation in the economy.
Calls for Government Intervention
Recognizing the severity of the situation, small business owners are actively seeking greater support from the government. The report details several key policy changes suggested by the businesses themselves.
Among the most frequently requested interventions are simplifying the tax process, which many find overly complex and time-consuming. Businesses also advocate for reversing the employers’ National Insurance contributions increase, aiming to reduce the cost of employment. Improved access to funding and grants is seen as crucial for investment and navigating cash flow challenges. Additionally, calls were made for reducing or scrapping business rates to alleviate the burden of property taxation, and for measures aimed at encouraging consumers to shop locally, fostering a supportive environment for community businesses.
Long-Term Growth Concerns
The Simply Business report issues a stark warning regarding the potential broader economic consequences of the current climate and the adaptive measures businesses are taking. While these steps are vital for individual firms to survive, they collectively pose a risk to the wider UK economy.
The necessary act of ‘battening down the hatches’ – cutting investment, reducing marketing, and delaying hiring – means that the engine of growth that small businesses represent could slow down significantly. The report cautions that these actions, however prudent for a single business, could harm the long-term growth prospects of these enterprises and, by extension, impact the trajectory of the UK economy as a whole, underscoring the urgent need for supportive policy and a more stable economic outlook.
