9 predictions for small businesses in 2023

With the cost of living crisis, soaring energy bills, and supply chain issues, small businesses have faced no end of challenges this year. Yet if the pandemic showed us anything, it’s that the small business community is resilient and they remain cautiously hopeful about the future.

​​What might 2023 bring? From side hustles to sustainability, here’s a collection of predictions from our own research and the latest headlines.

9 small business predictions for 2023

1. Rising costs will continue to pose a huge threat

We know from our SME Insights Report earlier this year that 70 per cent of small business owners believe rising costs are their biggest challenge.

Now almost half say they’re either “unsure” or “not confident” about their business’s future in 2023, according to our study of 600 small businesses in November 2022.

And with the Energy Bill Relief Scheme due to end on 31 March, this is likely to add further pressure to businesses struggling with spiralling costs. But the government will review the scheme, with the expectation that from April 2023 there will be targeted support for the most vulnerable businesses.

2. Will we see more side businesses crop up as a result?

Perhaps not out of creativity but out of necessity, we might start to see the trend for side hustles continue.

In fact the term ‘side hustle’ has seen a 229 per cent increase in search volume, according to Google search trends (May to October 2022, Yo3Y).

Whether that’s people setting up a side business alongside their full-time job or the self-employed looking for ways to make extra cash, it’s a trend that shows no sign of stopping.

Interested in setting up a side business? Check out our side hustle resources, from tax guides to popular ideas.

3. Will legislation be introduced to tackle late payments for small businesses?

Clients not paying small businesses on time is a wide-spread issue. In fact it’s estimated that £23.4 billion is owed in outstanding invoices to UK businesses.

To tackle the issue, the government recently launched a Payment and Cash Flow review.

Results from the consultation are due in early 2023, so keep an eye on the Knowledge centre for the latest updates.

If you’re struggling to receive money that’s owed to you for work you’ve done, read our guide and download a late payment letter template.

4. Wellbeing is likely to be top of mind for many

It’s not surprising that these pressures are impacting the emotional and mental health of small business owners. In November 2022, our study with 600 business owners found that one in five would describe their mental wellbeing as “bad” or “very bad”.

Yet in a separate study from March 2022, they also told us what they had time to do over the past couple of years:

• learn new skills (30 per cent)
• adapt their business’s services or products (22 per cent)
• adopt new technologies (18 per cent)

As the UK enters a recession, it’s never been more important for small business owners to look after their wellbeing. Have a look at our expert wellbeing resources for the self-employed for more support.

5. Sustainability and climate action

As businesses of all sizes start making climate change commitments, it’s important to avoid ‘greenwashing’ – when a brand creates a false impression of how environmentally conscious a product is.

Many large companies have come under fire for over-stating their ethical credentials this year – from Boohoo to Innocent Drinks – and they’re going to be looking at their supply chains to make changes.

Research from Deloitte has shown that consumers are increasingly looking to shop from companies that care about the climate emergency. So small businesses able to emphasise how they’re making a difference to the environment may be able to get ahead and win more business.

This could mean becoming a B Corp, using local and sustainable materials, or managing something you usually outsource within your business.

Read more on sustainable fashion and how to register as a B Corporation.

6. What tax changes are coming?

It’s been an unpredictable year with new prime ministers and U-turns on tax policies and IR35 legislation. Let’s focus on changes we know will be relevant in 2023:

• the amount you can earn tax-free is frozen at £12,570 (until 2028)
• the additional rate income tax threshold will reduce to £125,140 in April 2023
• the capital gains tax allowance will be cut from £12,300 to £6,000 in 2023-24, then to £3,000 in 2024-2025
• there’s a new penalty points system for VAT customers who submit late (this will be in place for Self Assessment in 2024)
• business rates are changing – but there’s a freeze on multipliers for 2023-24
• alcohol duty freeze has been extended – any duty changes will be announced in the Spring Statement and won't come in until 1 August 2023

And remember that the tax return deadline is on 31 January. You’ll need to send your Self Assessment and pay your tax bill by that date, but we have helpful Self Assessment resources to help make that process as smooth as possible.

If you received government financial support during coronavirus restrictions, it's likely that you'll need to report this on your tax return.

7. New ‘banking hubs’

Access to cash is important for any small business owner. But with 54 banks closing every month, this can have an affect on the services you can access in your area.

In 2023 we might start seeing new ‘banking hubs’ though, which could protect access to cash and help revitalise high streets.

These hubs provide shared services, with staff from different banks working there on rotation. Two hubs are being piloted in Cambuslang, Lanarkshire and Rochford, Essex. A total of 27 are planned for 2023 – find out if your area is due to get one.

Cash has arguably seen a revival as people look for ways to budget during the cost of living crisis.

For example, “cash stuffing” is a budgeting trend where people are taking money out of their bank account and putting it in envelopes to allocate their spending. And Google data shows YouTube videos with this term in the title have seen a 110 per cent growth in watch time, when comparing August to October 2022 to the same period in 2021.

8. Will tipping laws change?

Last year we reported on the government’s plans to overhaul tipping practices. The new legislation is still making its way through parliament, but it’s likely to become law in 2023.

Under the plans, all tips and service charges will go to staff. This means card payments too (all cash tips are already protected by law).

Here’s more on the legislation:

• employers will be required to pass on tips to workers without any deductions
• a statutory code of practice will set out how tips should be distributed to demonstrate fairness and transparency
• employers should have a written policy on tips and record how they manage tips
• rights for workers to request information about an employer’s tipping record – this will enable employees to bring credible claims to an Employment Tribunal

Read more about the tipping law changes.

9. Building a community for small business owners

More than 800 women small business owners told us what would help them with running their business, with 41 per cent saying networking would support them.

So in November 2022, we hosted our first in-person networking event for small business owners in London.

We hope that in 2023 we’ll be able to offer more events like this, giving our small business community space to connect and share experiences.

Our Women in Business community group launched this year too – and we look forward to seeing it grow in 2023.

Read more about how we’re Empowering Women in Business.

What are your predictions for 2023? Let us know in the comments below.