Just over one in four small to medium sized businesses in the UK are expected to have difficulties meeting payroll costs by April 2022. Accountancy Today reports that a perfect storm of financial pressures is set to hit businesses hard, some of which may only just be beginning to bounce back from the effects of the lockdown restrictions.

On the 6 April, the health and social care levy increase in National Insurance Contributions (NICs), is set to be introduced. The National Living Wage (NLW) is also set to rise by 6.6 percent in April, to a minimum of £9.50 per hour for workers over 23 years old. At the same time, inflation is rising sharply and interest rates are expected to increase again.

Claire Bennison, head of ACCA UK, said: “Our research reveals a very uncertain start to the new year for SMEs, countered with optimism about the long term for 2022. However, this essential progress can’t be achieved without the cashflow and people to help them grow, or indeed the resilience to do this too.”

“With more than 1 in 4 (26%) of UK SMEs anticipated to struggle to meet payroll in April, the government needs to seriously consider the economic implications of the planned hike in National Insurance rates and the impact it will have on UK SMEs who serve as a backbone to the UK economy. Ultimately, these figures point to the danger of businesses failing.”

The rising costs of living may create a double whammy for SMEs, as consumers hit by steep increases in fuel, food and tax costs tighten their belts and cut back spending on non-essential products and services. At the same time, SMEs will have to meet increased overheads for energy, goods and wages, and continue to face supply chain issues.

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