UK’s Small Business Crisis: Soaring Costs Threaten Future Growth

New Study Reveals Alarming Financial Strain on UK SMEs Amidst £22 Billion Funding Gap

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Key Takeaways:

  1. Cost Surge for SMEs: UK small businesses are grappling with costs £10,000 higher than last year.
  2. Diminishing Cash Reserves: The average SME bank account balance has plummeted, highlighting the financial vulnerability of these businesses.
  3. The £22 Billion Funding Gap: Limited access to finance poses a significant threat to the UK’s economic backbone – small businesses.


In a recent eye-opening study by Liberis, a leader in embedded business finance solutions, it has been revealed that small businesses in the UK are facing a critical financial crunch. With operational costs soaring, the sustainability and growth of these SMEs, crucial to the UK’s economy, hang in the balance.

Unprecedented Cost Increases

The Liberis analysis, drawing on Open Banking data, paints a stark picture: the average small business in the UK is now burdened with costs £10,000 higher than in the previous year. This dramatic rise is putting immense pressure on these businesses, which are the backbone of the UK economy.

The COVID-19 Aftermath and Depleting Reserves

Post-COVID, UK SMEs are facing the harsh reality of dwindling financial support. The cash buffers provided by government-led Covid Business Interruption Loans are depleting rapidly. The average SME bank account balance has decreased drastically from £16,000 in June 2020 to a mere £2,000 in July 2023.

The Hospitality Sector: In the Eye of the Storm

According to Alex Ivison, Chief Risk Officer at Liberis, “The hospitality industry is bearing the brunt of the cost crisis. With escalating labour, energy, and food costs, their operational expenses have more than doubled since 2020.”

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Credit Withdrawal by Mainstream Lenders

Adding to the woes, mainstream lenders, as per the Bank of England, are increasingly retracting credit from small businesses, intensifying the financial strain on these vital economic contributors.

Bridging the £22 Billion Funding Gap

The lack of accessible finance is a significant threat to the UK economy. SMEs, which account for about half of the UK private sector turnover and three-fifths of employment, are facing a daunting £22 billion funding gap.

Liberis’ Role in Addressing the Challenge

Alex Ivison remarks on Liberis’ efforts: “We are utilizing Open Banking to provide fair, revenue-based finance to those in need. Our approach ensures quick and fair financial support to underserved merchants, fostering financial inclusion and empowering small businesses.”


The challenges faced by UK small businesses underscore the need for innovative financial solutions. As they navigate through these turbulent times, the support from companies like Liberis and a concerted effort to bridge the funding gap will be crucial for their survival and growth.

For more information on Liberis and their efforts to support small businesses, visit Liberis.


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