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Published 31 March 2022
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The Biggest Business Challenges Facing UK SMEs in 2022/23

From rising energy prices to soaring inflation, UK SMEs are grappling with a number of significant business challenges going into the 2022/23 financial year. But what are organisations most worried about? And how optimistic are they feeling about the next 12 months? Find out more below.

As the UK heads into the new financial year – two years on from the start of the Covid-19 pandemic and in the midst of major geopolitical uncertainty – it is safe to say that small and medium-sized enterprises, or SMEs, are facing a range of pronounced business challenges. Some new, some all too familiar.

But first, the good news! Despite these challenges, 64% of UK managers and decision-makers said they felt optimistic about their organisation’s future in 2022/23 when asked as part of NerdWallet’s exclusive survey.

This can in part be attributed to the fact the country has now fully opened up, with Covid restrictions a thing of the past – though, as we shall see, the pandemic is still playing on the minds of the UK’s businesses.

Yet this optimism doesn’t mean business leaders aren’t well aware of the challenges ahead. More than two-thirds (67%) of those surveyed said that the current economic climate is making it more difficult for businesses to carry out longer-term financial planning, while more than half (51%) of organisations have delayed growth plans by at least 12 months for the same reason.

But what are the biggest business challenges facing UK SMEs, as identified by business leaders themselves? Read on to find out more.

Energy crisis tops list of biggest business challenges

While much of the focus has been on domestic households, the UK energy crisis is a serious concern for small businesses. Overall, 89% of respondents stated that rising energy prices were a problem, with 33% of those polled labelling it a ‘major’ challenge. This is more than any other issue facing the UK’s SMEs.

It follows that the Ukraine-Russia conflict, and the significant implications it has for energy costs and major business gas suppliers such as Gazprom, is also a notable worry for more than three- quarters (76%) of UK decision- makers.

The problem of rising energy costs coincides with many business energy contracts coming to an end in line with the financial year in April. A number of businesses will therefore be looking to either renew their existing contract, or switch business energy suppliers, at one of the most volatile periods for energy in recent memory.

Illustrating that point, the Federation of Small Business recently revealed that annual electricity and gas bills for small businesses in London rose 145% and 258% respectively between February 2021 and February 2022.

Inflationary pressures start to squeeze

Rising energy prices is just one thread in a web of problems that has caused the cost of living crisis afflicting the UK’s consumers and businesses alike.

Directly impacted by energy costs, and close behind in terms of business’s concerns, is rising inflation, with 87% of respondents stating it poses a challenge to their organisation.

The Bank of England expects inflation to hit 8% in the spring, only to potentially climb even higher later in the year. The last time the UK’s Consumer Price Index hit those levels was over 30 years ago.

This is being felt in a variety of different ways. Rising rental costs are a problem for 72% of the organisations surveyed; 54% have budgeted for higher-than-expected salary increases in line with inflation; and 57% have passed on the costs to consumers by increasing their goods or services due to their own rising overheads.

Rising interest rates and business finance

A side effect of soaring inflation is higher interest rates, as central banks – not only in the UK, but around the world – try to combat these pressures.

This has had an impact on borrowing, to the extent that nearly a quarter (24%) of our survey respondents said that rising interest rates have affected their organisation’s ability to access finance, such as business loans or credit cards.

It explains why 82% of the UK decision-makers we spoke to listed rising interest rates as a significant worry, while 71% pointed to their struggles in accessing finance as a challenge going into 2022/23.

Pandemic effects linger

Although the pandemic has largely slipped out of the headlines, businesses are still dealing with its effects – and not just the role it has played in pushing inflation and energy costs higher.

In the light of those aforementioned worries around rental rates, 59% of organisations surveyed said that remote working is now a permanent feature as a way to save on office overheads. At the same time, more than three-quarters (77%) of organisations also said they were still facing the challenges adapting to the ‘new normal’ created by the pandemic, including hybrid working.

The freedoms presented by these new working models has also potentially made it harder for businesses to retain their staff, an issue for 73% of respondents.

And then there is Covid-19 itself. With cases once again on the rise, the uncertainty surrounding the pandemic was a worry for 83% of organisations surveyed, behind only inflation and energy prices as businesses’ primary concern.

What can my business do to deal with these challenges?

You can’t control many of these factors. What you can control is how well set up and organised your business is going into the 2022/23 financial year.

Consider comparing business energy suppliers if your contract is coming to an end, and ensure you make the right choice for your business’s near-term future.

The start of the new tax year could be time to get your business bank account in order – or to find a new one that will give you the tools you need to meet your growth plans for 2022/23.

You may want to prepare for the unexpected by taking out business insurance.

And if you are looking to expand your organisation, there is a range of potential finance options that go beyond traditional business loans, including specific funding for start-ups.

» MORE: The Challenge Facing Businesses in a Tricky Jobs Market


The market research was carried out between 15 and 21 March 2022 among 402 UK adults via an online survey by independent market research agency Opinium. Opinium is a member of the Market Research Society (MRS) Company Partner Service, whose code of conduct and quality commitment it strictly adheres to. Its MRS membership means that it adheres to strict guidelines regarding all phases of research, including research design and data collection; communicating with respondents; conducting fieldwork; analysis and reporting; data storage. The 402 respondents were all decision-makers and managers within UK businesses.

Image Source: Getty Images

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