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Four in ten UK businesses nearly closed in 2024, new report reveals

September 17, 2024

Many of the challenges faced by businesses today are complex, multifaceted and interconnected – requiring a combination of human ingenuity and technological capabilities to solve.

A new report by The Entrepreneurs Network and Sumer, the UK’s leading mid-market accountancy practice for SMEs, has found that 44% of UK businesses have come close to shutting down in 2024.

The United Growth Report, which surveyed 610 entrepreneurs across twelve UK regions, highlights the significant challenges faced by UK SMEs in a turbulent economic climate. The report will be introduced by Kevin Hollinrake, Shadow Secretary for Business and Trade, at a special reception in the House of Lords.

Despite the dire statistic that nearly half of businesses have faced potential closure this year, the report also sheds light on the broader struggles within the SME sector. Half of the respondents reported difficulties in accessing financial support, while 65% of business leaders believe taxes are too high. High taxes were cited as the largest single obstacle to business growth (14%), closely followed by input costs (13%), difficulties accessing finance (11%), hiring challenges (9%), government bureaucracy (8%), premises costs (7%), and regulatory burdens (7%).

However, the outlook is not entirely bleak. Founders remain optimistic about the future, with 60% expecting revenue growth and 57% predicting a rise in consumer demand. Nearly half anticipate an increase in staff numbers (45%), and 49% are actively targeting growth rather than maintaining stability. This optimism reflects a broader belief among entrepreneurs that key drivers of business success will improve in the coming year.

Warren Mead, CEO of Sumer, highlighted the critical role that SMEs play in their communities, noting, “Our study makes for some uncomfortable reading, especially if you consider the knock-on effect of even one small business going under in a community. These organisations are embedded within the fabric of their local areas, providing much-needed employment, a sense of pride in place as well as a route for social mobility.”

Regional pride is also a notable theme in the report, with 89% of business leaders believing that companies can achieve their full potential without being based in London. However, a significant concern remains over economic inequality between UK regions, with many areas suffering from under-investment, skills shortages, and economic stagnation. Entrepreneurs overwhelmingly agree that Greater London receives preferential treatment, and there is a strong call for government action to reduce these disparities.

The report outlines several key policy recommendations to support UK SMEs and foster a more balanced economic landscape:

– Maintain competitive business taxes and avoid further increases in the Corporation Tax rate.
– Reform Capital Gains Tax to avoid discouraging entrepreneurial activity.
– Make Business Rates fairer and incentivise more productive land use.
– Invest in infrastructure and streamline the planning process to support business development.
– Explore alternative financing methods for construction and increase the supply of business premises by liberalising development regulations.
– Expand mayoral devolution, granting ‘London-style’ powers to metro mayors, and consider devolving more fiscal powers from Whitehall.

Eamonn Ives, Research Director at The Entrepreneurs Network, emphasised the importance of government action to unlock the potential of the private sector: “If the new Government is to make good on its promise to restore meaningful growth to every corner of the nation, it cannot ignore the role the private sector plays in delivering jobs and opportunities. Entrepreneurs don’t tend to wait around for a hand up, but that’s not to say there aren’t things the Government can do to make their lives easier.”

As the UK grapples with economic challenges, the United Growth Report serves as a crucial call to action for policymakers, highlighting the need for targeted reforms and investment to support the nation’s entrepreneurs and ensure sustainable growth across all regions.