UK small businesses are facing a ‘silent pandemic’ worse than Covid-19 – and 38 stores are shutting down every single day
A silent pandemic is gripping UK small businesses, with pressures mounting to levels comparable to – and in some cases worse than – the Covid-19 crisis, but without the emergency lifeline that saved many during lockdowns.
A stark new report from Parliament’s Business and Trade Committee, published on Wednesday (11 February), warns that small and medium-sized enterprises (SMEs), which make up 99.8% of all UK businesses and form the backbone of local economies and high streets, are buckling under a barrage of cumulative, structural challenges.
These include chronic late payments, soaring energy costs, rampant retail crime, punishing business rates, complex tax burdens, and recent policy changes that have piled on extra expenses.
“The evidence we heard during this inquiry was stark. Many small businesses are now operating under pressures comparable to those experienced during the Covid pandemic but this time without an emergency support framework in place,” said Committee chair Rt Hon Liam Byrne MP.
“SMEs are facing late payments, rising energy costs, increasing crime, a complex tax system and barriers to growth that are compounding rather than easing. These pressures are not isolated; together they pose a real risk to business viability, high streets and economic growth. High streets do not die by accident. If the government is serious about growth, it must set out a more coherent and ambitious plan for the businesses that make up so much of the UK economy.”
38 stores closing a day
The cost is already visible on the nation’s high streets. Data cited in the report shows an average of 38 stores closed each day on Great Britain’s high streets in the first half of 2024, a grim statistic that has become emblematic of the broader crisis facing independent retailers and small shops.
Other shocking numbers paint the picture:
- UK small businesses were owed a staggering £112 billion in unpaid invoices by the end of 2024, according to Sage, with nearly half of invoices paid late, fuelling an estimated 38 small suppliers closing every single day due to cashflow strangulation.
- Energy bills remain punishing: average electricity prices in 2024 were nearly double those of three years earlier, and over 25% of sub-postmasters reported increases of more than 50% since 2022, with some seeing monthly costs double.
- Retail crime is costing businesses £4.2 billion a year, including prevention measures, adding around 10p to every transaction in convenience stores.
- Tax compliance alone drains SMEs of 242 million hours and nearly £25 billion annually (FSB estimate), while the Autumn Budget added an estimated £7 billion in cumulative policy and regulation costs to retail, per the British Retail Consortium.
- Sectors like hair and beauty are seeing average annual cost hikes of £25,000 per business, and hospitality has shed 69,000 jobs – three times the rate across the wider economy.
Businesses at breaking point
Witnesses told the committee that many firms have reached a breaking point: passing on costs to customers, cutting staff, or simply closing. Unlike the pandemic, when government support was mobilised at speed, there is currently no coordinated national response, leaving SMEs with little resilience to absorb further shocks.
The report sets out ten key recommendations to turn the tide, including enforceable measures to end late payments, overhauling the VAT and business rates systems to be fairer and less growth-inhibiting, targeted energy support, stronger action on crime, simpler skills access for small employers, and a coherent national framework for SME support.
Without urgent action, the committee warns, the UK risks accelerated closures, hollowed-out high streets, and damage to the government’s own growth ambitions.
For many independent shop owners, café proprietors, and local suppliers, the question now is whether Westminster will treat this silent pandemic with the same urgency it once showed Covid.
