Hiring freeze poised for 2023 as small businesses panic over recession

Research from small business lender iwoca says the recession is small businesses’ main concern going into 2023. 

A survey of 500 SME owners across the country over two weeks in December showed that 43% identified the recession as their top concern while a quarter expect their business to shrink in the next 12 months – up a third from this time last year. 

Eight in ten (79%) small business owners expect to employ the same number of workers this year as they did in 2022, and only 7% suggest they would employ more staff over the year, a 2% drop on last year. 

Read more: UK areas with the biggest wage increases 

In the context of soaring prices of energy, raw materials, and the scarcity of labour, inflation remains the main challenge for over a third (38%) of small businesses. The effects of inflation – decreased consumer spending (29%) and increased business running costs (38%) – are also cited as key worries for UK small business owners. 

The survey showed only a quarter (26%) of small businesses expect revenue to grow over the next year, down from 28% at the start of 2022. 

It comes after the government has agreed to abandon the cap on cost of gas and electricity for companies from the spring, replacing it with a discount scheme on wholesale prices.

Last week, Chancellor Jeremy Hunt told industry leaders that the current scheme to support businesses was "unsustainably expensive".

Extending the scheme in its current form could “cost tens of billions of pounds” depending on wholesale energy prices, he argued.

Over three quarters (76%) of small business owners are concerned about the scaling back of support, while one in three (32%) expressed significant worry around the scaled back support.

Read more: David Fairs to step down from TPR in mid-March

Seema Desai, iwoca’s Chief Operating Officer, said: “This recession presents extreme uncertainty for small businesses.

"As big banks retrench, our job as a specialist SME lender becomes even more important. Business owners are going to need finance to help with cash flow, pay staff wages, increase stock and of course cover things like higher energy bills and cost of materials.”