New data has revealed data showing that SMEs in the UK face costs £10,000 higher than they were during the same period last year.

Analysis by Liberis, a pioneer in embedded business finance solutions, utilising Open Banking data, provides a comprehensive view of the UK’s small business sector. The study underlines the resilience displayed by small businesses so far but highlights alarming trends that demand immediate attention.

According to Liberis, the average small business in the UK now confronts costs that are £10,000 higher than they were at this time last year. This staggering increase presents a substantial challenge to the growth and sustainability of these businesses.

The research also indicates that the cash buffer provided by various government-led Covid Business Interruption Loans is quickly depleting. Small businesses, which have relied on these loans to weather the storm of the pandemic, now face the harsh reality of diminishing financial support.

The average SME bank account balance has now dwindled. Liberis’ research shows a downward trend, with the average SME bank account balance dropping from £16,000 in June 2020 to £2,000 in July 2023.

“Since the onset of the COVID-19 pandemic in 2020, the UK economy has experienced one of the most significant inflationary challenges in four decades. While attention has primarily focused on the Cost of Living crisis affecting individuals and households, the escalating Cost of Doing Business has received relatively sparse coverage,” said Alex Ivison, Chief Risk Officer at Liberis.

Alex Ivison, Chief Risk Officer continued: “The rise in expenses has been unevenly experienced. Our research shows that small businesses in the hospitality industry are experiencing the worst of the cost of doing business crisis. A tight labour market, higher energy costs, and rising food prices have meant these businesses’ average costs have more than doubled since 2020.”

To make matters worse, the Bank of England reports that mainstream lenders are increasingly withdrawing credit to small businesses, further exacerbating the financial strain they face.

Solving the UK’s £22 billion SME funding gap

The lack of accessible finance presents a threat to British small businesses and the UK economy. SMEs account for around half of the turnover in the UK private sector and three-fifths of employment in the UK, according to the Department for Business & Trade. Despite the impact small businesses have on the UK economy, the latest figures from the Bank of England estimate that there is an SME funding gap of £22 billion in the UK.

Commenting on how Liberis is leading efforts to close the UK’s funding gap, Alex Ivison, Chief Risk Officer said: “We leverage Open Banking in order to more fairly provide revenue-based finance to merchants who need it. The data enables us to tailor our product to best suit their needs, which ensures we can provide much-needed financial support to underserved merchants quickly and fairly, promoting financial inclusion and empowering small businesses to thrive.”

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UK small businesses face costs 10k higher than during the same period last year