Are Cornwall’s Small Businesses Being Pushed to Breaking Point?

Smaller businesses are bearing the brunt of rising labour costs and economic uncertainty, according to the latest research from Azets, the UK top 10 accountancy and business advisory firm, which has offices in Truro and Plymouth.

The findings, drawn from the Azets Barometer, a quarterly survey tracking business sentiment across the markets the firm serves, paint a stark picture for SMEs, which make up the vast majority of businesses across the UK, including here in Cornwall.

The Numbers Behind the Concern

The survey, based on responses from nearly 500 firms in the first part of this year, found that 67% of business leaders cited economic uncertainty as their biggest worry over the next 12 months, with geopolitical uncertainty close behind at 54%.

When asked about potential negative impacts on their businesses, the results were telling: 40% pointed to higher labour costs, 33% to reduced profit margins, 32% to pressure on cashflow, and 30% to long-term financial predictability. A further 30% had already passed price increases on to customers, while 29% flagged a volatile and changing tax landscape, and the same proportion reported shifts in consumer demand or purchasing behaviour.

Budget Measures Pile on the Pressure

A series of Budget measures has placed what the research describes as unprecedented costs onto employers, with increases to employers’ National Insurance contributions and the minimum wage cited as key drivers. For many businesses, the response has been to freeze new hires in order to keep overheads down, contributing to a wider slowdown in the jobs market.

The Azets Barometer, which draws on primary research with more than 1,700 business leaders, was conducted just before the recent escalation of conflict in the Middle East, meaning the full impact of geopolitical developments may not yet be reflected in the figures.

Smaller Firms Hit Hardest

One of the most significant findings is the gap between smaller and larger companies. The research identifies that smaller firms are “struggling with structural disadvantages such as less financial buffer, less pricing power and more exposure to cost pressures they cannot easily pass on.”

Peter Gallanagh, UK and Ireland Chief Executive at Azets, acknowledged the difficulty but struck a cautiously optimistic tone about the resilience of SMEs.

“There will be many businesses in Cornwall where these findings resonate in their workplaces,” Peter said. “However, despite this, SMEs are very resilient. They back themselves and what they do, and have directors who are close to the coalface and adept at taking decisions quickly when the time calls for it.”

Leadership Is Key

Peter was clear that the ability to make decisions, and to make them quickly, is what separates businesses that survive from those that don’t.

“It’s not wrong decisions that kill a business,” he said. “It’s not making decisions at all. It’s leadership with the capacity to make those decisions, and quickly, that really sets them up well and gives them a much better ability to be more resilient and succeed through these difficult times. SMEs have proved time and again they have the attitude and aptitude to do this.”

He added that Azets’ regional team of tax and business advisory experts is well placed to help local businesses navigate the pressures identified in the survey.

Cornwall in Context

According to the latest annual business activity figures from the Office for National Statistics, there are 2.73 million VAT and/or PAYE businesses across the UK, with 235,000, representing 8.6%, based in the South West. With such a significant concentration of SMEs in the region, the findings of the Azets Barometer are particularly relevant for businesses trading across Cornwall.

📷Peter Gallanagh, Azets UK CEO.