Despite the Chancellor’s Budget promising 12 new investment zones to help kickstart the UK economy, more than a quarter of a million UK SMEs are still teetering on the edge, pushed to the brink by the toxic combination of the pandemic and cost-of-living crisis. 5% of UK SMEs - equivalent to 275k businesses – fear they’ll have no choice but to wind up their businesses due to widespread economic volatility this year.

New research from solution-led fintech provider, Nucleus Commercial Finance highlights the scale of the challenge facing businesses up and down the country. On average, UK SMEs have seen their business costs rise by 15% in the past 12 months, with a similar rise expected over the coming year as well.

The picture looks even more worrying for small and medium sized businesses specifically – those with 10 to 249 employees. Among this group, costs have risen on average more than 18%. Crucially, when looking to the year ahead, 83% of businesses say that costs have risen and are expected to rise further.

However, businesses are looking to mitigate the situation in a variety of ways. More than a third (35%) of SMEs are increasing the cost of products and services to help cope. Around a quarter (23%) are delaying planned investment in tech/ infrastructure, while 16% are shelving their growth ambitions.

The findings also shine a spotlight on the extent to which increased costs will pass onto employees up and down the country. The data shows that 14% of UK SMEs say they’ve delayed planned investment in staff training and development, 13% are asking employees to work more from home, and the same amount are reducing staff hours. It was also found that 12% are reducing staff numbers, 11% are instigating a promotion/ hiring freeze, 9% are reducing staff perks, and 5% are reducing their contribution to employee pensions.

Chirag Shah, CEO and Founder of Nucleus Commercial Finance commented: “While the Chancellor’s Budget and recommitment to the creation of 12 new entrepreneurial zones signalled a clear route to kickstart the economy and revitalise investment in the UK; SMEs and their employees are still at high risk this year.

“Going forward, the government needs to give businesses the confidence that their commitment and drive for growth will be properly supported, combined with substantive incentives for them to take a financial leap. So, while the Chancellor’s inclusion of a new tax credit for SMEs who spend at least 40% of their expenditure on Research & Development may be a welcomed bonus; business owners will still be laser-focussed on exactly how the energy cost freezes will prevent them from having to turn the lights out forever.”