Inflation, decreased consumer spending and increased running costs are alongside the dreaded R-word as the biggest concerns for SMEs in 2023.
And with big concerns come big decisions in business, such as whether to flatline recruitment to ride out the uncertainty, or to push ahead whilst competitors might be scaling back.
According to iwoca’s online survey of over 500 SMEs in December 2022, over two in five (43 per cent) small business owners identify a recession as their top concern in 2023.
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 per cent) of small businesses. The effects of inflation – decreased consumer spending (29 per cent) and increased business running costs (38 per cent) – are also cited as key worries for UK small business owners.
The Bank of England Agents’ summary of business conditions – 2022 Q4 reports that companies expect to keep headcount flat over the coming year, suggesting that the labour market has started to loosen.
Economic uncertainty and concerns about weakening demand have led many firms to implement hiring freezes, leave vacancies unfilled or let temporary contracts expire. A small minority of companies reported making redundancies.
However, in sectors where revenues continue to grow, such as business services, a significant number of firms said they expected to increase headcount.
Recruitment difficulties experienced earlier in 2022 eased slightly towards the end of the year, reflecting weaker demand for labour. For professional services, IT, engineering, catering and care services, finding new recruits remains one of the key issues.
As business owners brace for little to no growth in 2023, it looks like the big recruitment freeze could be with us for a while.
Jose Garcia-Brennan is Principal Consultant at CMD Recruitment which works across Wiltshire and the South West. He said, “2022 was a challenging year for recruitment in Wiltshire, with a strong candidate-driven market and increased pressure for companies to adapt to meet candidate requirements. Candidates have been vocal about wanting flexible working, pay transparency, benefits, sustainable practices and a strong DEI focus from companies. To attract and retain top talent, businesses have had to improve their employer brand and employee value proposition. Many employers considered talent recruitment the most significant HR challenge of 2022.
“As we move into 2023, companies are facing uncertainty about inflation and energy prices, and are taking action to drive growth, cut costs, and mitigate risks. This may include encouraging more staff to work remotely and reducing their workforce. To maintain and improve staff retention, companies need to focus on employee health and wellbeing, and continue to invest in DEI. Smaller businesses may be in a better position to offer personalised benefits to bolster employee financial wellbeing.”