Everything every director needs to know
Business owners have seen an increase in two thirds of their bills and essential business expenses in the past 12 months even before historic energy bill rises appear according to a new survey.
The research and findings were commissioned by BusinessRescueExpert, one of the top independent insolvency practices in the UK, showed worsening economic conditions across every industrial sector and area of the country.
Four out of five of the 500 directors, CEOs or business owners who responded said that along with their energy bills increasing several other essential charges have risen during the previous year.
Fuel and transportation costs had risen for three quarters of respondents while 68% had also seen increases in the costs of raw materials, deliveries and suppliers costs in 2021/2022.
Over half saw their water rates increasing, while 45% said their staffing costs had gone up including wages and National Insurance Contributions.
The only area that saw an overall decrease was spending on advertising and marketing which is discretionary and done by the business themselves.
Chris Horner, Insolvency Director with BusinessRescueExpert, said the survey is a valuable snapshot of this moment when businesses are expecting to experience a large rise in energy prices and other bills but before support measures from a new Prime Minister are announced and implemented.
He said: “The past two years have seen unprecedented trading conditions for directors and business owners that were forced on them through no fault of their own.
“Now Covid-19 appears to be behind us and it should be a time to recover and recuperate, instead most of us are looking at unprecedented rises in essential energy bills unless there is some drastic intervention from the new administration.
“But even if energy bills happen to be frozen, we can see that lots of other essential costs have also risen for companies making their job of making a profit and a positive contribution to the economy just as difficult as it was during the pandemic years, if not more because there is currently no additional support measures to help them.
“We’ve been looking at the troubles facing pubs and restaurants recently and as our survey shows, businesses are having to deal with exactly the same issues no matter what industry they’re in or no matter where in the country they’re based.
“One silver lining to this particular cloud is that similar solutions will work just as effectively for a sole trader in Southampton as they would for a Marketing agency in Sunderland or a newsagent in Strathclyde.
“The first thing they should do is get some advice from an insolvency professional which is usually free for an initial consultation.
“Depending on the individual circumstances facing each a business, a range of options exist to help them rescue and restructure including administration, CVAs or insolvency moratoriums.
“Alternatively closure might be the more logical and preferable route forward for them and solutions such as creditors voluntary liquidation (CVL) or members voluntary liquidation (MVL) could produce a better result for them both professionally and personally.
“Anybody looking at the research and nodding or recognising similar patterns in their business should use this period before big decisions are being announced to get in touch and find out what they can do to help themselves and their company today rather than keeping their fingers crossed.”
Methodology
A total of 500 business owners, directors, CEOs and CFOs were surveyed for their views and experience on the cost of doing business in 2022.
The survey was weighted to achieve roughly comparable responses based on company size, geographic location and industrial sector to give as broad as possible a snapshot of how companies are managing their expenditure ahead of higher predicted bills and charges coming in Q4 2022 and all of 2023.
Question One – how many employees does your company employ?
| Company Size | Total | % |
| One – Sole Trader | 182 | 36.3 |
| Two to Ten employees | 109 | 21.8 |
| 11 to 49 employees | 55 | 11 |
| 50-99 employees | 70 | 14 |
| 100 or more employees | 71 | 14.2 |
| None of the above | 14 | 2.8 |
The majority of respondents were sole traders with the next largest category being businesses employing between two and ten employees.
Question Two – What part of the UK is your business located in?
| Location | Total | % |
| Northern Irelands | 8 | 1.6 |
| Scotland | 35 | 7 |
| Wales | 30 | 6 |
| North West England | 54 | 10.8 |
| North East England | 31 | 6.2 |
| Yorkshire & Humber | 39 | 7.8 |
| East Midlands | 39 | 7.8 |
| West Midlands | 38 | 7.6 |
| South West England | 35 | 7 |
| London | 72 | 14.4 |
| South East England | 84 | 16.8 |
| East of England | 36 | 7.2 |
The survey has a good representation from each nation of the UK and English regions with the majority being located in the South East and London with North West being the next most populous – reflecting the number of businesses based in each location in total.
Question Three – What industrial sector does your business primarily operate in?
| Industrial Sector | Total | % |
| Agriculture | 16 | 3.2 |
| Mining | 2 | 0.4 |
| Manufacturing | 33 | 6.6 |
| Energy, Gas or Air supply | 13 | 2.6 |
| Water supply & sewerage | 4 | 0.8% |
| Construction | 44 | 8.8% |
| Retail | 75 | 15% |
| Transportation & Storage | 8 | 1.6% |
| Hospitality, accommodation & food | 15 | 3% |
| Real Estate | 20 | 4% |
| Communication & Info services | 18 | 3.6% |
| Professional, Scientific & Technical services | 33 | 6.6% |
| Administration & Support | 21 | 4.2% |
| Public administration & defence | 5 | 1% |
| Education | 40 | 8% |
| Health & Social Work | 24 | 4.8% |
| Arts, entertainment & recreation | 41 | 8.2% |
| Other | 89 | 17.8% |
All industrial sectors are represented in the survey but the top three named sectors are Retail (14% of respondents); Construction (8%) and Arts, entertainment & recreation (8%). Other appears to be disproportionately represented but this could be due to confusion regarding sector classification on the part of respondents.
Question Four – over the past 12 months – what has happened to your payments for the following?:
| Bill | Decreased | Remained the same | Increased | N/A | Main finding |
| Corporation Tax | 35(6.99%) | 155(30.94%) | 155(30.94%) | 156(31.14%) | Equal numbers increased or remained the same |
| VAT | 25(4.99%) | 167(33.33%) | 156(31.14%) | 153(30.54%) | Majority remained the same |
| National Insurance | 34(6.79%) | 177(35.33%) | 228(45.51%) | 62(12.38%) | Majority increased |
| Bounce Back Loans | 31(6.19%) | 125(24.95%) | 79(15.77%) | 266(53.09%) | Majority remained the same |
| Other loans | 38(7.58%) | 90(17.96%) | 83(16.57%) | 290(57.88%) | Majority remained the same |
| Business rates | 16(3.19%) | 136(27.15%) | 187(37.33%) | 162(32.34%) | Majority increased |
| Rent | 12(2.40%) | 118(23.55%) | 218(43.51%) | 153(30.54%) | Majority increased |
| Electricity & Gas | 10(2.00%) | 41(8.18%) | 409(81.64%) | 41(8.18%) | Majority increased |
| Water | 22(4.39%) | 127(25.35%) | 290(57.88%) | 62(12.38%) | Majority increased |
| Staff costs inc wages | 20(3.99%) | 140(27.94%) | 226(45.11%) | 115(22.95%) | Majority increased |
| Raw materials/suppliers/deliveries | 17(3.39%) | 71(14.17%) | 340(67.86%) | 73(14.57%) | Majority increased |
| Fuel/transportation | 15(2.99%) | 43(8.58%) | 384(76.65%) | 59(11.78%) | Majority increased |
| Marketing/advertising | 28(5.59%) | 199(39.72%) | 186(37.13%) | 88(17.56%) | Majority decreased |
| Capital purchases | 36(7.19%) | 159(31.74%) | 171(34.13%) | 135(26.95%) | Majority increased |
| Sundries inc petty cash | 35(6.99%) | 176(35.13%) | 206(41.12%) | 84(16.77%) | Majority increased |
Out of 15 different expense categories, respondents saw their outgoings rise in 10 of them with Electricity & Gas bills already being the most common with 81.6% of respondents saying theirs had gone up even before the October 1st rise.
The next most common rise experienced was with fuel and transportation costs with 76.7% of respondents reporting an increase here while 67.9% saw the price of raw materials, deliveries and suppliers costs rise in the previous 12 months.
Water rates had risen for 57.9% of respondents with 45% reporting increases in National Insurance Contributions and other staff costs including wages.
Corporation Tax, VAT and repayments for bounce back loans and other loans remained the same for the majority of respondents.
The only area that saw a decrease was spending on advertising and marketing by the businesses themselves.
Question Five – In order of concern, which bills are you most worried about being able to meet in the next few months?
| Bills | How worried are you out of 10? (average) |
| Electricity & Gas | 3.95 |
| Water bills | 5 |
| Wages & staff costs | 5.09 |
| Rent | 5.23 |
| National Insurance | 5.49 |
| Other bills | 5.61 |
| Business Rates | 5.74 |
| VAT | 6.11 |
| Corporation Tax | 6.29 |
| Bounce back loans or other loans | 6.5 |
Respondents were asked to rate out of ten how worried they were about being able to pay a particular bill with 1 being the most concerned and 10 being not worried at all.
Electricity and Gas bills were easily the most concerning with an average total of 3.95.
Water bills followed this at 5 with staff wages and other associated costs following closely with an average of 5.09.
Being able to service bounce back loans and other loans was the least worrying with an average score of 6.5. This is mainly due to the fixed and certain nature of the repayment schedule.
Question Six – In the event of severe cash flow issues – where would you go first for insolvency advice?
| Information source | Mean ranking |
| My accountant | 2.83 |
| Internet searches or websites | 2.96 |
| Friends and family | 3.34 |
| An online insolvency firm | 3.71 |
| A high street insolvency firm | 3.79 |
| Other | 4.36 |
The final question asked respondents to rank in order (1-6) which source they would use to find insolvency advice for their business.
The mean revealed that the majority of respondents would first turn to their accountant for advice on insolvency and other measures to protect their business.
RESPONDENTS WORRIES – IN THEIR OWN WORDS
We gave respondents the opportunity to let us know if they had any other worries or concerns about the cost of doing business in 2022 and have reproduced the most striking:
“Constant rises in everything. How long can we continue to not pay ourselves over staff?”
“It’s a very worrying time. I don’t know if we are going to be here in a few months. There is no support for the cost of living crisis.”
“Going to be hard to compete with bigger companies on price and to keep profit.”
“I am worried that costs will increase so much that my business will no longer be profitable.”
“I have had to put my prices up so I’m worried I’ll lose customers.”
“My job is supplying music lessons which are an expense that most families won’t be able to meet.”
“We’re a charity and are worried about being affected by the same issues as those we support – energy rates and rent for example.”
“A very worrying time as everyone’s bills are going up. Will they want my DJ/Photo booth at their parties and weddings if they’re cutting back?”
“Running costs are going up which is a concern as people are spending a lot less on their entertainment.”
“With interest rates rising and the cost of living going up, I’m concerned my business may go bankrupt.”
“In the last recession we had money in our deposit account to help us throughout. This time we don’t have those funds available because of the pandemic.”
“The cost of energy is frightening.”
“Everything is so unpredictable. I’m concerned about the lack of demand as the cost of living increases for my customers. They may not be able to afford my services as they start to cut back on outgoings and reduce budgets.”
“I’m concerned about the cost of living affecting my business. I’m worried about rents and bills increasing, meaning that it’s not feasible for my business to continue. I can’t increase my wages to balance the bills.”
“I’m not sure my business is going to be here in 2023.”
“Costs are only going to increase. Luckily we laid off staff a while back but it’s difficult to be effective while providing value for money with less work hours being put in.”
“My business is B2C and the cost of living crisis is already resulting in lower than average sales. People are watching their money and my products (clothes/shoes/homewares) are generally not a high priority when budgeting.”