Almost four in five (79%) SME owners in the UK feel that the current economic landscape is worse than the pandemic, new research from Bibby Financial Services (BFS) shows. 

The latest SME Confidence Tracker survey also shows that just 11% of those surveyed are fully prepared to deal with further cost rises.

Bibby Financial Services UK managing director Derek Ryan said: “Two years ago, we thought the Covid-19 pandemic and successive lockdowns were the greatest issues to hit businesses in a generation. However, SMEs are now telling us that the current economic climate is unsustainable. In the face of a near-certain economic recession and spiralling costs, it’s life or death for many of the UK’s SMEs.”

BFS’ findings show that 51% of SMEs would face two more lockdowns over any further rise in inflation. 

About 76% of the respondents agree that the current economic state is killing entrepreneurialism.

The finding comes at a time as businesses face record inflation, which is expected to rise by 80% in October and SMEs demand action from the government. 

Rising costs have forced 41% of SMEs to cut back on investments, while 43% of SMEs are cutting overall costs, and 47% are passing higher costs to customers.

As part of cost-cutting measures, 12% of SMEs are reducing their staff, which could lead to more than 650,000 redundancies. 

Furthermore, SMEs feel that rising inflation could mean even higher costs for customers (63%), hiring, salary and promotion freezes (26%), and reduction in investments (23%). 

To cope with the situation, around 15% of SMEs will turn to short-term lending. 

Any kind of assistance would be welcomed by the SMEs, with 44% of respondents favouring an extension to the VAT cut.

Ryan added: “SMEs demonstrated stoic resilience during the pandemic, in large part thanks to the Government’s intervention, and the provision of loans, grants and furlough payments. But now they are on the brink of an even greater crisis without a lifeline.  

“While the new Government’s announcement that it is committed to supporting SMEs overcome these challenges is a positive sign, right now, all SMEs have is a placeholder. It remains to be seen whether the detail of the Government’s package will be sufficient. If it is not, many viable businesses will be lost. And, if we do not protect these businesses now, the UK’s economy could take many years to recover.”