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Recession prediction puts UK small businesses on high alert

Recession prediction puts UK small businesses on high alert Umbrella.UK Insolvency

Recession prediction puts UK small businesses on high alert Umbrella.UK Insolvency

British sole traders and small businesses are taking steps to protect their businesses after the Bank of England warned the UK will slip into recession this year.

The economy is forecast to shrink in the last three months of 2022 and will continue to get smaller until the end of 2023.

Analysis from financial technology firm Iwoca shows that over three-quarters of small firms are worried about recession, with many taking steps to protect themselves.

Many firms have decided to increase their cash reserves to help weather financial headwinds, while research shows that almost half of business loan brokers have filed more credit applications for their clients.

Steven Scoufarides, from Iwoca , said: “The current economic outlook for small businesses is precarious – we are seeing signs of an increasing number of SMEs searching for finance solutions to manage their cash flow and brace for the potential of a recession.”

A higher demand for loans can be a sign that businesses are struggling to cover costs because of a reduction in revenue.

In an attempt to stem soaring inflation the Bank of England increased interest rates to 1.75%, meaning businesses will pay more interest on affected borrowing.

Governor Andrew Bailey said the cost of living squeeze would get ‘even worse’ if the Bank didn’t increase interest rates.

Tom Fox, Licensed Insolvency Practitioner at Umbrella Insolvency said:

“Soaring energy bills, caused by Russia’s invasion of Ukraine, is the main reason we are seeing rising inflation and weak growth. The Bank of England now expect inflation to hit 13%, so we’re expecting things to get worse before they get better.

“Without meaningful political action, we will see businesses borrowing more to make ends meet. Some businesses will be able to weather this storm, but others will fold under the pressure.

“Any businesses that are worried about their financial position should seek professional advice now. The earlier you speak to a professional, the more options you’ll have in the long run.”

For more information about Umbrella Insolvency and our services for small businesses, speak to a member of the team today. Call: 0800 611 8888.