Close Menu
  • News
  • Home
  • In Profile
  • Finance
  • Legal
  • Technology
  • Events
  • Features
  • Wellbeing & Mental Health
  • Marketing
  • HR & Recruitment
  • About
  • Advertise
  • Events Calendar
  • Business Wall
  • Subscribe
  • Contact
  • 0843 289 4634
X (Twitter) LinkedIn YouTube
Trending
  • Finance Founder Celebrates Business Milestone With Advice For Entrepreneurs
  • Fast fashion giant Shein accused of “dark marketing” – what does it mean for businesses?
  • Why GDP Growth Isn’t the Full Story for UK Businesses
  • Windsor Expo Wows: A Showcase of Success, Innovation, and Local Business!
  • Women aren’t risk-averse, they’re risk smart
  • “The Art of Difficult Conversations” Webinar
  • How data is transforming the fabric of SME lending
  • An interview with Dr. Jo Salter MBE: The RAF’s first female fast jet pilot.
X (Twitter) LinkedIn YouTube
SME Today
  • About
  • Advertise
  • Events Calendar
  • Business Wall
  • Subscribe
  • Contact
  • 0843 289 4634
  • News
  • Home
  • In Profile
  • Finance
  • Legal
  • Technology
  • Events
  • Features
  • Wellbeing
  • Marketing
  • HR & Recruitment
SME Today
  • About
  • Advertise
  • Events Calendar
  • Business Wall
  • Subscribe
  • Contact
  • 0843 289 4634
  • Twitter
  • LinkedIn
  • YouTube
  • RSS
You are at:Home»News»Issues for SMEs in 2023 as the recession looms
Issues for SMEs in 2023 as the recession looms

Issues for SMEs in 2023 as the recession looms

0
Posted By sme-admin on February 1, 2023 News

The last few years have presented numerous challenges for SMEs.  Just when there seemed to be light at the end of the Covid tunnel, there has been rapid inflation and recession is now looming (predicted by the Bank of England to be the longest since records began).

As we move into 2023, Jenifer Martindale,  Partner in the Commercial Litigation team at Wilsons Solicitors Jenifer_MartindaleLLP, looks at what risks and issues the UK SMEs are likely to face as 2023 progresses?

Repaying Coronavirus loans

The Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) were a business saver for many SMEs during the pandemic providing government backed loans to over 1.6m businesses.  Both Schemes saw the first 12 months’ of interest covered so effectively provided a repayment free loan for the first year.  The Schemes closed on 31 March 2021 so most SMEs with loans will now be liable to repay.  Many SMEs may struggle to meet the loan repayments particularly if costs continue to rise.

The Government’s latest data (as at 31 March 2022, published 5 September 2022) shows that around 78% of facilities are “on schedule” with repayments although 28% of facilities on the BBLS have accessed the Pay As you Grow option which essentially allows businesses to extend the loan term, take a 6-month repayment break, or pay only interest for 6 months.

SMEs which default on CBILS or BBLS, will face formal recovery action by the lenders.  Whilst the loans are ultimately guaranteed by government, default may have an impact on SMEs’ other loans or facilities, and could cause a domino effect of recovery action.  This will be of concern to those directors with personal guarantees

Inflation and rising costs

Inflation hit 11.1% in the 12 months to October 2022 with one of the greatest drivers being the rising gas and electricity prices.  For SMEs a concern will be affordability if prices continue to rise as there is no cap on business energy (unlike for domestic users).

The Government has introduced the Energy Bill Relief Scheme which will provide a discount on business energy bills that will run for 6 months from 1 October 2022 to 31 March 2023.  The size of the discount will depend upon the type of energy contract the business has and the rates the business is paying per kWh. The maximum discount allowed is 34.5p per kWh for electricity and 9.1p per kWh for gas.  No doubt the Scheme will help many SMEs afford their energy bills, but the position from April 2023 remains uncertain.

SMEs have also seen commercial rents increasing significantly in 2022.  This is in part a response to significant losses faced by landlords during the pandemic, but also to rising interest rates and demand outstripping supply.  It is unlikely that rents will decrease in 2023.  If leases are due for renewal or a rent review is scheduled, SMEs should ensure they are properly advised on the process.

Bad debts

Rising inflation and the cost-of-living crisis is likely to increase the number of unpaid debts and ultimately bad debts.  SMEs will need to make difficult decisions in terms of whether to write off those debts or incur legal costs through debt recovery action, with no guarantee of being able to recover those costs (or the debt itself).

SMEs should be proactive in their approach by having robust contracts/terms and conditions, identifying problematic payers early and preventing unpaid debts accumulating, and have a debt recovery process in place (including solicitors).

Talent retention

Despite unemployment being at the lowest level since February 1974, there are concerns over the shortage of workers in the UK economy with the number of job vacancies being at historically high levels of around 1.2m.

Added to this, annual wage growth, including bonuses, was at 6% over the three months from August to October 2022 (compared to October 2021).

In such market conditions, SMEs are likely to face challenges in retaining talented employees and filling job vacancies unless offering generous, above market rate salaries, and other benefits.  This is likely to add to SMEs already stretched budgets and affect profit margins.

SMEs will need to ensure they have effective HR resources and a good knowledge of employment law.

Supply chain security

For most manufacturing SMEs, the Covid-19 pandemic caused significant supply chain disruption.  This disruption eased early in 2022, but economic uncertainty and rising costs, worker shortages, the Russia-Ukraine war, China’s stance on Covid lockdowns, and the availability of various metals and raw materials is likely to cause ongoing disruption into 2023.

SMEs are likely to face challenges in securing supply chains to prevent disruption.  Risk areas should be identified and ameliorated where possible including having robust contracts.

Insolvency

All of the above issues and financial pressures will inevitably lead to an increase in SME insolvencies in 2023.

SMEs in dire financial circumstances will face immense pressure to avoid insolvency and may need to consider a voluntary agreement with creditors to do so.  Early advice from insolvency practitioners may assist.

Summary

There is no doubt that 2023 is going to be a difficult year for SMEs and they should do all that they can now to identify risk areas and secure their business as best they can taking effective professional advice where appropriate.

Jenifer Martindale is a Partner in the Commercial Litigation team at Wilsons Solicitors LLP

Share. Facebook Twitter Pinterest LinkedIn Tumblr Email

Related Posts

Windsor Expo Wows: A Showcase of Success, Innovation, and Local Business!

Whistleblowing and the Cost of Silence: Why SMEs Must Have Policies in Place

Entrepreneurs Circle Makes £5M move with 15,000 sq ft HQ acquisition

Comments are closed.

Follow SME Today on Linkedin and share all the topics you find interesting
Get £100 of free trades - ii trading account

The Newsletter

Join our mailing list for the best SME stories, handpicked and delivered direct to your inbox every two weeks!

Sign Up
Events Calendar
    • Marketing
    June 20, 2025

    Fast fashion giant Shein accused of “dark marketing” – what does it mean for businesses?

    June 16, 2025

    “My business almost died, twice – here’s how I saved it”

    • Finance
    June 20, 2025

    Finance Founder Celebrates Business Milestone With Advice For Entrepreneurs

    June 20, 2025

    Why GDP Growth Isn’t the Full Story for UK Businesses

    • Health & Safety
    January 29, 2025

    UK takeaways guilty of shocking hygiene failures:

    December 18, 2024

    Comment on Covid Corruption Commissioner Investigation

    • Events
    June 19, 2025

    Windsor Expo Wows: A Showcase of Success, Innovation, and Local Business!

    May 27, 2025

    Jose Ucar Confirmed for Leadership Live 2025 Speaker Line-Up

    • Community
    June 2, 2025

    National Charity Accelerates Children’s Reading Through New Corporate Partnership

    May 14, 2025

    Social care experts launch an online marketplace to disrupt a sector in crisis.

    • Food & Drink
    June 16, 2025

    Hospitality industry risks collapse

    June 4, 2025

    Creative Nature Launches Its First-Ever Kids’ Snack Bar Range in Tesco Nationwide

    • Books
    April 24, 2025

    Values-Driven Professionalism: A Path to Client Loyalty

    December 2, 2024

    Banish the banshee boss: how to lead without fear – addressing the issue of fear-based management and how NOT to be this manager

    About

    SME Today is published by the same team who deliver The Great British Expos’. We have been organising various corporate events for the last 10 years, with a strong track record of producing well managed and attended business events across the UK.

    Join Our Mailing List

    Receive the latest news and updates from SMEToday.
    Read our Latest Newsletter:


    Sign Up
    X (Twitter) YouTube LinkedIn
    Most Recent Posts
    June 20, 2025

    Finance Founder Celebrates Business Milestone With Advice For Entrepreneurs

    June 20, 2025

    Fast fashion giant Shein accused of “dark marketing” – what does it mean for businesses?

    June 20, 2025

    Why GDP Growth Isn’t the Full Story for UK Businesses

    June 19, 2025

    Windsor Expo Wows: A Showcase of Success, Innovation, and Local Business!

    June 19, 2025

    Women aren’t risk-averse, they’re risk smart

    Categories
    • Books
    • Community & Charity
    • Education and Training
    • Environment
    • Events
    • Features
    • Finance
    • Food and Drink
    • Health & Safety
    • HR & Recruitment
    • In Profile
    • Legal
    • Marketing
    • News
    • Property & Development
    • Sponsored Content
    • Technology
    • Transport & Tourism
    • Wellbeing & Mental Health

    Copyright © 2020 SME Today.

    • ABOUT SME TODAY: THE GO TO RESOURCE FOR UK BUSINESSES
    • Privacy
    • Contact
    Copyright © 2025 SME Today.
    • ABOUT SME TODAY: THE GO TO RESOURCE FOR UK BUSINESSES
    • Privacy
    • Contact

    Type above and press Enter to search. Press Esc to cancel.