Rising costs are dominating the list of worries that self-employed people in the UK say are keeping them up at night. And, with over 4 million self-employed entrepreneurs in the UK, that makes for a lot of sleepless nights!
GoSimpleTax surveyed 500 of the UK’s self-employed entrepreneurs this autumn, and asked them about their most pressing concerns. Unsurprisingly, rising costs topped the list. Two thirds said they were worried about the rising cost of energy, with over half having already had to increase their rates to cover their increasing costs.
Almost half said they were worried about being able to pay themselves enough from their business to manage the increased cost of living. Meanwhile, losing customers due to cutbacks was a worry for 45%, being able to maintain cashflow a concern for 40% and managing the rising cost of doing business an issue for 36%.
Why this is important
These are stark figures for such an entrepreneurial sector, which is typically personified by a ‘can-do’ attitude. To find that so many people are worried about things which are mostly out of their control is a real red flag to the health and stability of the self-employment market.
The present economic climate creates plenty of worries for the self-employed. These people are rarely a priority of policymakers yet they are at the coalface of small business entrepreneurialism in the UK.
The fact that so many are worried about rising costs impacting their business in the next year is deeply troubling. The number of self-employed people in the UK fell by almost a million last year. If more are forced to abandon their small businesses because they can no longer afford to operate, it’s a huge loss for the economy.
Price increases to manage the impact of rising costs
Over half (51%) of self-employed people surveyed said they had already put their prices up, by an average of 5.59%. A further 29% said they planned to increase their rates in the coming year against a backdrop of record inflation.
Cash flow is the lifeblood for sole traders and when outgoings exceed income, there is often little choice but to pack up shop. Small businesses will undoubtedly face difficult decisions in the coming months, and increasing costs looks to be one of the most likely ways for SME entrepreneurs to combat their rising outgoings.
As of July 2022, there were 4.29 million self-employed people in the UK. At the start of 2020 – as the Covid-19 pandemic began – there were over 5 million; the current figure takes the sector back to where it was in 2015. The country’s self-employed contribute an estimated £303 billion to the British economy each year.
The importance of the self-employed and freelance sector should not be overlooked. This is a group which powers many sectors, pumping billions into the economy, and worrying about paying bills, maintaining cashflow and more will continue to heap the pressure on.
So what can self-employed entrepreneurs do?
Aside from increasing costs to recover their margins, self-employed entrepreneurs need to make sure they have a crystal clear view of their financial health. That means working closely with an accountant, or using software, to maintain a current picture of how well (or otherwise) your business is doing so you can act immediately to rectify any issues or pull back any unnecessary expenditure.
Small steps like filing your self-assessment tax and corporation tax returns early will allow you to budget properly for non-moving, fixed outgoings. Likewise, take steps now to ensure you’re compliant with new initiatives like Making Tax Digital for Income Tax will stand you in good stead in future by helping you get control over your tax outgoings.
Meanwhile, make sure you are taking advantage of any and all Government initiatives that might help you, and take simple steps like renegotiating contracts as often as you can.
