XSBI data indicates early impact of rising cost of living | Xero Blog

Xero Small Business Insights (XSBI) data for April 2022 shows signs of emerging risks to small businesses in the UK, Australia and New Zealand. The rising cost of living pressures, inflation, ongoing supply chain issues and tight labour markets are some of the key factors contributing to small business performance.

The Xero Small Business Index is a unique indicator that uses timely data to show how small businesses are performing overall each month. The Index is based on four key measures of jobs, sales, time to be paid and wages, and shows performance changes in the short and long term.

Cost of living pressures hit small business sales, wages continue to rise

In recent months we’ve seen small businesses in the UK, Australia and New Zealand demonstrate strong sales growth, however in March and April sales growth slowed across all three countries. Sales rose 6.3% year-on-year (y/y) in the UK after 13 months of double-digit growth, 5.8% y/y in Australia and only 2.9% y/y in New Zealand. This slowdown in sales is likely an early sign of the impact of the rising cost of living affecting consumers’ capacity to spend.

Another trend we’re seeing in the small business sector is rising wages. Wages rose 4.5% y/y in the UK in April, 4.1% y/y in Australia and 4.8% y/y in New Zealand. The impacts of inflation mean real wages are falling, which is reducing the purchasing power of consumers. Essentially, inflation is hitting small businesses twice. Not only are they dealing with rising costs, but their potential customers are tightening their purse strings. This blog post from Xero Economist, Louise Southall, explains the impact of inflation on small businesses in more detail. 

Late payments adding to challenging conditions in the UK

In the UK, the Xero Small Business Index in April was 83, its lowest point since February 2021 and the most drastic monthly fall since April 2020. British small businesses continue to face challenges, now with the slowdown in consumer spending and having to wait longer to get paid. The time it took for small businesses to be paid on average increased to 29.9 days in April. Similarly, they experienced the longest late payment time since September 2020, at an average of 7.7 days late.

What small businesses can do to manage the current challenges

With so many factors putting pressure on small businesses right now – from increased costs, supply chain issues, to having to increase wages, and experiencing slower sales, here are some tips for small businesses to help them cope:

With so many factors influencing operating conditions for small businesses, it is vital that you stay across your finances and work closely with your trusted advisors to make the right decisions that will allow the business to stay profitable. 

Read more about the XSBI metrics for April in these updates:

  • Global data 
  • Australia data 
  • New Zealand data 
  • UK data
  • Or visit the XSBI homepage.

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    XSBI data indicates early impact of rising cost of living | Xero Blog