Mhis wife and I visit London a few times a year to see her family and our friends from university. We are here again this time for the whole month of January living like Londoners, staying in a rented house, taking out the bins – sorry, the rubbish – and buying our food at Waitrose. The stay gave me time to observe, talk to people, and walk around, and here’s what I learned: I need to stop complaining about how difficult it is to run a small business in the United States. It is much more difficult to run a small business in the UK. Particularly now.
Imagine running a business where inflation doesn’t exist 6.5%as it is the United States, but 10.5%. The cost of living here is pushing UK consumers to buy less – so much so that, according to one recent surveytwo-thirds of them plan to reduce their spending in 2023. In a country of traders, this is not trivial.
Like in the United States, unemployment remains low here, so there is still a shortage of workers and a continued demand to retain them, which, combined with rising prices, is forcing business owners to raise wages. So, a business owner in the UK is not only hit by slowing demand but also rising costs at the same time and at a higher rate than in the US.
Energy the costs are also hit people hard. All my friends here have complained that their utility prices have more than doubled this year, despite government assistance. I’ve seen portable heaters in restaurants next to tables and even our Airbnb host asked us to try to keep the temperature below 17°C (62.6°F) if possible. The good news is that it seems like the energetic relief is coming, but it’s not coming fast enough.
How has this affected UK small businesses? Not great.
According to a new investigation outsourcing platform Fiverr, business owners report they have lost an average of £83,000 since the start of the economic downturn, equivalent to half their annual turnover with almost one in five UK start-ups and small businesses surveyed losing over £100,000 since the start of the economic downturn. Some business owners across the country say they had to “close their doors” because of these higher costs.
The Fiverr study also found that 92% of UK start-ups and small businesses fear for the future of their business and almost one in five people admitted to being “very scared”. British small business confidence has plummeted, with another survey showing a 50% drop the number of companies planning to expand this year compared to summer 2022.
All that, and then there’s Brexit. Perhaps there is an argument that the UK’s newfound freedom to control its economic destiny will work. But there are clearly many people who disagree. Especially small business owners who rely on overseas sales, such as this British entrepreneur in the bike industry who attribute Brexit to a loss of revenue of over £100,000, and more than three-quarters of UK businesses who say the trade deal has made it difficult for them to increase sales and grow their activity, according to a British Chambers of Commerce Survey.
Even when the economy is strong, the UK regulatory environment for business far exceeds what we face in the US.
Most workers who work a five-day week must receive at least 28 days of paid annual leave per year. The government too requires employers to grant their workers additional leave when they are ill. Employers are required to provide paid and unpaid services maternity leavein addition to paying contributions to their workers retreat, health care and responsibility (worker’s compensation). Taxes – excluding the impact of state taxes – are also higher here, with the highest rate in the country being 45% for those earning over £150,000 ($180,000) compared to the highest tax rate. higher in the United States by 37% for those earning more than $523,000. .
I don’t wonder if it’s a good thing or not that the government demands all these benefits from its business community. All I know is that none of this is required in the United States, and even with all these regulations, the The British economy remains the sixth largest economy in the world, although there are 79 countries with more inhabitants.
London is busy, as always. The pandemic has receded, there are few masks to be seen, most storefronts are rented out, and most people are gainfully employed. But there’s a gloom hanging over the UK, and it’s not due to the weather (which has been cold but clear – most of the time).
The UK is a big country and London is a big city. But I’m happy to run my small business in the United States and not here.
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