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HSBC UK Reveals the Cost of Living’s Big Impact on Small Businesses

Rising prices and falling spending are having a big impact on small businesses’ mental health; according to HSBC UK

The rising cost of living isn’t just affecting small businesses’ bottom lines. According to the research of HSBC UK, mental health is taking a big hit too.

Twenty-six per cent of small business owners cite economic pressures as a catalyst for their declining wellbeing.

Forty-one per cent recognise inflation as the main threat to their company. Thirty-eight per cent attribute declining consumer spending as a threat and 36 per cent point to rising energy costs.

Likewise, 22 per cent are being crushed by wage inflation, while 19 per cent are struggling with cash flow management.

A problem shared

Despite the prevalence of threats, the research identifies a wide-reaching reluctance to talk about such threats.

Tragically, 55 per cent aren’t disclosing the truth about their situation to anyone; not even friends or family. As a result, the true impact on business remains a topic of taboo.

A majority 73 per cent aren’t discussing financial support with their bank while 29 per cent admitted to dipping into personal savings to fund their business over the last few months.

But when researching financial support avenues, 52 per cent preferred to do so online instead of in person.

Commenting on the findings, behavioural psychologist Jo Hemmings said: “With the rising cost of running a company, on top of an increase in the cost of living, small business owners are facing a perfect storm.”

Hemmings isn’t surprised that many are struggling with their personal wellbeing and says that a reluctance to address future challenges is understandable.

“Business owners shouldn’t see talking through their personal or professional concerns as any kind of admission of failure and research shows that internalising anxieties will not help,” Hemmings continues.

“They are not alone and I’d urge those feeling the pressure of running a small business at this difficult time, to talk through their challenges with professionals who can provide practical help, including their bank.”

Forty-three per cent of small business owners worry about the impact of the next six months on their business. Yet despite this, 65 per cent remain confident their business will survive.

Thirty-eight per cent expect to see a jump in profits next year. Professional services firms are the most agreeable to this view at 67 per cent.

The bounce back

As one of the world’s largest banks, HSBC naturally has measures in place to assist customers experiencing financial difficulty. Its trained early warning signs team work to identify such customers. The team is responsible for contacting them to discuss solutions.

HSBC UK uses its report to detail the telltale signs of a customer in deep water. These include repayments in arrears and a lack of funds to make commercial card payments when due. On a personal level, business owners report experiencing sleepless nights and increased anxiety; a direct impact on wellbeing.

Solutions offered to customers are on a case-by-case basis but can include:

  • Capital repayment holidays to free up cash within businesses
  • Reviewing overdrafts or trade loans to allow stock to be held for longer
  • Providing trade finance solutions to support customers with their supply chains
  • Extending bounceback loan (BBL) repayments through the pay-as-you-grow scheme
  • Partial or total refinancing or restructuring of a facility
  • Extension of recovery/collection periods

The response to HSBC UK reaching out has been positive with 68 per cent of affected customers avoiding defaulting on payments for at least six months after.

Peter McIntyre, head of business banking, HSBC UK Cost Living small businesses
Peter McIntyre, head of business banking, HSBC UK

“With the current economic environment creating business uncertainty, it’s fair to say that many small companies have had a rough ride these last few months,” says Peter McIntyre, head of business banking at HSBC UK.

“Owners are at the helm, so it’s no surprise that navigating cost challenges is having an impact on their own personal wellbeing,” continues McIntyre. “The good news is that when customers engage with us early on they are more likely to avoid going into financial difficulty.

“We encourage all business owners to get in touch with us if they are worried about their financial situation – we are here to help.”

Author

  • Tyler is a fintech journalist with specific interests in online banking and emerging AI technologies. He began his career writing with a plethora of national and international publications.

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