The UK small business sector is currently navigating a challenging economic landscape, marked by rising insolvency rates and increased operational pressures. In December 2024, England and Wales reported 1,838 company insolvencies, reflecting a 14% decrease compared to December 2023. However, projections for 2024 anticipate approximately 31,000 business failures, indicating a 10% increase from the previous year and marking the fourth consecutive year of rising insolvencies.
Impact of Increased Taxes
The Autumn Budget 2024 introduced significant tax changes affecting small businesses. Employers’ National Insurance Contributions (NICs) are set to rise from 13.8% to 15% in April 2025, applicable to income over £5,000 per employee, a reduction from the previous threshold of £9,100. This adjustment aims to generate an additional £25 billion in revenue but imposes higher employment costs on small businesses.
To mitigate the impact, the Employment Allowance has been doubled to £10,500, offering some relief to small businesses by reducing their NICs liability. Despite this, the increased tax burden may lead to cost-cutting measures, including potential layoffs or reduced hiring, as businesses strive to manage the heightened financial demands.
Supply Chain Disruptions to exterior cleaning brands
Global supply chain disruptions have significantly impacted UK businesses, including those in the exterior cleaning industry. Recent geopolitical events, such as conflicts in Eastern Europe, have exacerbated these challenges by disrupting trade routes and causing shortages of essential materials. A study involving 300 supply chain and procurement decision-makers in the UK revealed that 45% anticipate increased supply chain disruptions over the next 12 months, with 60% acknowledging that their supply chains feel more fragile than ever.
Increased Operating Costs in the Exterior Cleaning Industry
The exterior cleaning industry has faced rising operating costs due to several factors:
Fuel Prices: Escalating fuel costs have significantly increased transportation expenses for service delivery. For a typical exterior cleaning business covering approximately 200 miles per week, the average fuel cost has surged over the past decade. In 2014, diesel prices averaged around 131p per litre, whereas by early 2024, prices have fluctuated between 160p and 180p per litre. Assuming a fuel efficiency of 35 miles per gallon (or approximately 7.7 miles per litre), daily fuel costs for 200 miles have risen from around £15 to £20 in 2014 to approximately £25-£30 in 2024. This substantial increase places additional financial pressure on businesses reliant on transport for service delivery, and when speaking to Ultimate Clean Solutions; they noted that this converts to £200 a month in extra fuel for them.
Labour Costs: A shortage of skilled workers has led to higher wages, further straining budgets. Beyond just wages, worker expectations have also evolved, requiring businesses to provide additional benefits such as pensions, paid leave, and flexible working conditions to attract and retain staff. The rise in minimum wage and increased demand for skilled labour have pushed hourly wages upwards, directly impacting operating expenses.
VAT and Growth Constraints: VAT regulations can significantly impact the scalability of small businesses. In the UK, businesses with annual revenues exceeding £90,000 must register for VAT, adding a 20% charge to their services. This threshold often discourages small business owners from expanding their operations beyond a certain revenue level, as crossing the VAT limit necessitates increased pricing, potentially reducing customer demand. For exterior cleaning businesses operating near this threshold, strategic pricing and operational efficiency become crucial to maintaining profitability while complying with tax regulations.
Demand Trends According to Google
An analysis of Google Trends data indicates fluctuating interest in exterior cleaning services over the past year. Search terms such as “gutter cleaning” and “pressure washing” have experienced periodic spikes, often correlating with seasonal changes. However, the overall trend suggests a slight decline in consumer interest, potentially reflecting economic uncertainties and reduced discretionary spending.
