Recent research conducted on behalf of the insolvency trade body R3 has revealed the biggest sources of anxiety for UK businesses. Currently, the two biggest concerns facing British businesses is the possibility of leaving the European Union and the introduction of auto-enrolment pensions.
While Brexit might not come to pass, it is clear the impact of a ‘yes’ vote in next month’s referendum weighs heavily on the minds of nearly a quarter of the businesses surveyed. Unfortunately for the 23 percent most concerned by auto-enrolment pensions, this is something all businesses will have to deal with sooner rather later.
Concerns change depending on the size of the business
The research found that a business’s primary concern would change significantly depending on its size. Larger businesses, those employing at least 251 people, were more worried about the prospect of leaving the EU than smaller businesses. 44 percent of large firms admitted being concerned about the financial impact a vote to leave the EU would have.
Perhaps understandably, the biggest concern for micro-business, which in this case is classified as those with 2-5 employees, was the impact of the National Living Wage. These worries are far more acute for smaller businesses than in the wider business community. Clearly, micro-businesses are concerned about the effect the rising costs will have on their profitability.
Quarterly tax reporting was a concern shared by micro-businesses and sole traders; while the biggest worry for companies with 11-251 employees was auto-enrolment pensions.
What other concerns do UK businesses have?
56 percent of British businesses admitted to being concerned about at least one of the developments listed by R3. The full list of respondents’ concerns is detailed below:
• Brexit – 23 percent
• Auto-enrolment pensions – 23 percent
• Quarterly tax reporting – 19 percent
• National Living Wage – 18 percent
• Digitalisation of tax reporting – 11 percent
• Universal Credit – 7 percent
• Apprenticeship Levy – 6 percent
• None of the above – 44 percent
British businesses remain optimistic
The possibility of leaving the EU is certainly making planning for the future more challenging for decision-makers, and this uncertainty could impact investment decisions over the next few months.
However, despite the fact that there are clearly a number of factors playing on the minds of UK businesses, generally speaking, business confidence and economic optimism remains high.
The results of R3’s Business Distress Index, a long running survey of 500 UK businesses, shows 50 percent of businesses expect their activity to increase over the next 12 months when compared to the past year. Only 5 percent expect their levels of activity to fall. 50 percent of businesses are also more optimistic about the state of the economy, while only 16 percent are more pessimistic.
A new range of burdens to contend with
Commenting on the findings, Andrew Tate, the president of R3, said: “UK businesses have enjoyed a period of widespread, rapid growth, boosted over the last year by low inflation and low fuel costs. It would be unclear as to the effect of a Brexit on company insolvency in the UK.
“However, as well as slowing economic growth, businesses will have to contend with a range of new compliance and reporting burdens in the next few years. This could put some businesses’ finances under significant pressure.
“Although the Brexit debate is grabbing the headlines, it’s important to remember that businesses face a plethora of other incoming regulatory and compliance challenges. Just as many businesses – especially smaller ones – are worried about auto-enrolment pensions as are worried about Brexit.”