Sales at Britain’s small businesses collapsed by more than a fifth over the past year as customers cut back in the face of soaring inflation and rising interest rates, according to new research by accounting software provider Sage.
Figures drawn from data on 85,000 small- and medium-sized companies using Sage’s platform showed the sector is struggling, with revenues, profits and cash balances all falling in recent months, raising concerns about the Britain’s growth prospects.
The tracker showed sales dropped 27.9% in the three months to March compared with the same period 12 months earlier. The second quarter improved slightly but revenues were still down 21.1% on the year, according to a more up to date subset of customer data. Profits fell 8.3% in the three months to March against the year earlier.
“Such pressure increases the likelihood of defaults on corporates’ debt and may lead some firms to reduce investment and employment sharply,” the BOE said in a note Tuesday. Rapid wage growth and high energy prices rocked the sector last year. But energy bills are cheaper now, and the tracker showed wage costs fell 6% in the first quarter of 2023. Separate official insolvency figures this month showed compulsory liquidations in July jumped by 81% from a year ago to 248. Overall insolvencies, however, declined by 6%.
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