Looking back: SMEs reflect on 2021

2021 has thrown up plenty of challenges for small businesses. But among the chaos, there’s also been lots to celebrate.

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What a year it’s been. From Covid-19 lockdowns to Christmas parties, if 2020 was the year we’d never forget then 2021 is probably the year we’d like to.

But among the lows, there were also lots of highs for small businesses in the UK. At the start of 2021, there were 5.5 million SMEs based in the UK. Together, they’ve shown outstanding resilience to the challenges and upheavals of the past 12 months.

We asked our small business heroes to tell us how they navigated the biggest business moments of 2021, as well as their thoughts on the year ahead.

January: The New Year begins… as does the UK's third national lockdown

It wasn’t the best of starts. As Covid cases rose, a new national lockdown began and the public was once again told to stay indoors. There was a sense of camaraderie however, as SMEs battled through shared difficulties.

Lee Cullen, owner of No Brainer, a PR and communications agency, said the start of 2021 was by far the biggest challenge of the year.

“The combination of a lockdown and homeschooling made life incredibly difficult in January and February and, as a limited company director, furlough was not really a viable option,” he said.

“Across the agency, we understood that everyone had their own unique circumstances to contend with, but so did our clients and they were very understanding throughout. The spirit of ‘in it together’ felt very real then.”

Less-reported at the time, business travel was also put on hold, which left many new businesses in the lurch. With borders closed, entrepreneurs lost the ability to network and access investment, stalling growth at a pivotal time.

Florian Winkler, co-founder at London-based fintech company, VitraCash, told us that travel restrictions in the first half of 2021 brought challenges. VitraCash was based in Austria, and struggled to meet with potential investors virtually.

“Travelling over to London was a challenge that government regulation exacerbated. This was one of many reasons that contributed to migrating our business to the UK.”

Thankfully, borders were to open again.

February: Britain leaves the EU, bringing red tape for SMEs

Britain finally left the EU on 31 January 2021, leaving lots of bureaucratic paperwork and international delays for SMEs to contend with.

“Brexit caught us and many small businesses off guard about how complicated the transition was going to be, ” said James Hagerty, founder of ethical startup, Presto Coffee.

For Hagerty, who featured in this year's top 100 Startups, it was the delays in moving stock across borders that presented a major hurdle.

“It took three months to move our first pallet over,” he said.

Despite the many months that the government had to prepare for the occasion, confusion quickly arose as trade levels dropped and customers suddenly found themselves facing extra charges when buying from EU suppliers.

Andrew Dark: Director and co-owner of Custom Planet

For Andrew Dark of promotional product company Custom Planet, government support was lacking when it came to Brexit.

“The advice and guidance seemed to be there initially — business leaders were told that if they did everything the government recommended before the deadline, then disruption would be minimal,” said Dark.

“But in reality, there were a whole host of other unforeseen issues that have made it very frustrating and difficult to deal with our EU suppliers and customers this year.”

March: Budget day brings further business support – as well as a freeze on income tax

As it approached, budget day was a worrisome event for many SMEs that were still struggling to stay afloat during the national lockdown. In-person trading had now been banned for 10 weeks, wreaking havoc on many retail, leisure and hospitality businesses that couldn’t move online.

Thankfully, the chancellor introduced much-needed support measures including additional business rates relief and extra cash grants for businesses.

An extension to the furlough scheme was also announced, throwing SMEs another life-line for the coming months.

Jon Walsh is co-founder of gut-loving British startup, Bio&Me. Walsh said: “For us as a business [the government support has been] very good. We received a Covid-19 loan and are now paying it back.”

Dhruvin Patel is the founder of the health-tech business Ocushield, which produces blue-light blocking screen protectors. Patel said the government had been very supportive for small businesses: “From bounce back loans to furlough I think we have been lucky – it's better than nothing, right? As business owners we almost don't expect much as we know it's a path that we have to forge on our own, so in my opinion I think the government has been generous.”

April: Easing of restrictions allows all non-essential businesses to reopen

To the joy of consumers, April brought the return of non-essential shops and the resurrection of the beloved English pub, as restrictions were lifted and all non-essential businesses were allowed to reopen.

There was excitement for thousands of small firms across the country that could finally open their doors after months of uncertainty. High street footfall boomed by 28.7% this month as we came out in droves to support our local businesses.

May: Vaccination rollout brings hope

The UK hit a milestone of delivering 20 million vaccines in May, injecting small businesses with a dose of optimism.

As the gov.uk website revealed, the vaccines had a hugely significant impact in the UK, reducing hospitalisations and deaths to save more than 11,700 lives.

This month provided immense relief for lots of SMEs, as the government announced it was on track to offer a first dose to all adults by the end of July, finally shining a light at the end of the lockdown tunnel.

June: Freedom Day is pushed back

As a consequence to the lifting of restrictions, Covid-19 cases began to rise. To ensure that hospitalisations didn’t also increase, the government pushed the original date of Freedom Day (21 June) back to July.

Rob Hill, CEO of group activities booking provider Fizzbox, said the pushing back of the Freedom day date had a huge impact on the company’s activity providers: “We saw a huge increase in bookings as we approached Freedom Day due to the pent up demand the Lockdown restrictions had created. When the date got pushed back, we had to reschedule all of the experience bookings – which was a big logistical headache!

Rob praised the agility of the Fizzbox team in helping the business adapt to the situation, telling us: “Our skilled team and fantastic experience providers managed to power through.”

July: Freedom Day arrives

The day we’d all been waiting for arrived – and it couldn’t have come at a better time. Restaurant and pub spending increased by a massive 53%, according to research by Lloyds Banking group, as all coronavirus restrictions were lifted. The men’s England football team reached the Euro Cup Final and the school holidays began, and there was a real sense of euphoria as the festival season came upon us.

According to a recent poll, carried out by SimplyBusiness in July 2021, around one in three small business owners kept some coronavirus restrictions in place, with some feeling nervous that measures were being lifted too early. But the same survey found that 67% were optimistic about trading levels returning to normal.

August: Workers return to the office, with many opting for a hybrid business model

As August arrived many of us finally said goodbye to our home offices and headed back into the workplace, after almost a year and a half of tracksuit-bottomed Zoom calls.

However, as we reported in October, few businesses have asked for full-time office working from their employees. Instead, the hybrid working model has fully taken hold.

Nine percent of respondents said they have already transitioned to a hybrid model, while 45% said they plan to do so over the next 12 months, according to a survey of 1,000 business owners by cyber security specialist Nexor.

So what challenges has this since created for small business owners?

Of the many we spoke to, issues around onboarding and recruitment were consistently flagged.

Nick Braund founded Words + Pixels mere days before the pandemic, and had to get used to remote working early on. Braund said: “A major focus for me growing the company to 15 people in just 24 months has been creating an environment and culture that people want to be a part of. Onboarding new starters, especially those who are at the beginning of their career who rely on learning through osmosis, has been essential.”

Gary Knight is CEO of social audio app, WOLF (The World’s Online Festival). Knight told us about the new challenge of hiring and keeping key staff that has arisen from hybrid working – particularly in tech.

Knight said: “The flexibility to work from home has made attracting talent hugely competitive. It’s certainly an employee’s market. In recruiting, our focus has been on creating a business where our employees want to work.”

September: Rishi Sunak announces in his Autumn budget that National Insurance is being raised

The government’s decision to raise National Insurance, enabling an additional £36bn in funding for the NHS, caused shockwaves across the country.

Mike Cherry, national chairman of the Federation of Small Businesses, described the proposed changes as “astonishing”, particularly as SMEs are still recovering from the impact of the coronavirus pandemic.

Under the changes, employers and employees were each taxed an additional 1.25 percentage points, wreaking havoc for many small business owners, who were already struggling to recruit staff.

The impact of the change is still to be felt. But business owners across the country have worked hard to ensure they could absorb the added costs.

October: Supply chain prices soar – but the Bank of England does not raise interest rates.

October brought more tricks than treats as the end of the furlough scheme arrived and inflation rose, sending prices soaring across the supply chain. Across the UK, there were empty shelves as a scarcity of HGV drivers meant delays in products leaving ports and even a panic-buying of petrol.

For our small businesses, this was a troubling time. But they faced the challenge head on, and used their innovation and expertise to emerge with stronger, more agile supply methods.

Indian spiced condiments brand Pico Sauces was launched in 2015 by entrepreneur Arjun Gadkari. Gadkari said: “As a business, we have been hit by the disruption to global trade and shipping since the start of the pandemic. This spring was a particularly challenging time for our team based in India, as the core foundations of our supply chain were rattled. However, we got through it and are now moving from strength to strength.”

There were mixed opinions from the financial SMEs we spoke to about rising inflation. Some felt the Bank of England was being too risky by choosing to keep interest rates low, while others appreciated the support as borrowing continued to be an attractive option.

Experts cautioned business leaders to keep a close eye on their accounting and finances.

Hector Macandrew is co-founder of Hydr, invoice finance software provider. Macandrew expressed surprise that The Bank of England’s base interest rate didn’t rise in October, noting: “Businesses will need to keep a very watchful eye on their cash flow and net working capital.”

November: COP26 takes place

In November, we had COP26 – the United Nations’ (UN) annual summit on climate change which took place in Glasgow.

Emotions differed when it came to this event. Lots of businesses we spoke to expressed optimism about the changes and conversations that the conference would bring to the business world. But many also felt that not enough decisive action was taken by political leaders.

Stuart Murphy, founder of tidal energy startup TPGen24, was disappointed by the lack of actionable measures announced at COP26. Murphy told us: “I’m afraid I’m with Greta on this, COP 26 perfectly encapsulated the realpolitik of international relations on the issue of climate change. If anything it was a talking shop for deep thinkers, political advisors and lobbyists opposed to an occasion with effected real, unilateral change.”

Namrata Sandhu is CEO and co-founder of Vaayu, a carbon footprint calculator for retailers. Sandhu was encouraged by the conference, and said it proved reducing carbon emissions is no longer a ‘nice to have’ for firms.

Sandhu added: “As we enter into 2022, I am hopeful that businesses will take a hard and honest look at their carbon footprint and start to understand their global supply chains because it is only with this clarity that they can begin to reduce their carbon impact where it matters most and crucially, at scale.”

December: Festive trading period begins as the Omicron variant begins to spread

Festive trading got off to a roaring start as consumers made up for lost time and got into the Christmas spirit early to beat shipping delays.

But then came news of the Omicron variant, pressing pause on many corporate Christmas parties and celebrations. Hospitality and retail businesses are still reporting lower footfall and many cancellations.

In contrast, for SMEs that have been able to adapt to the pandemic and move online, the effect has been minimal.

As an online business, Dhruvin Patel feels confident about Occushield for the festive trading period.

Patel said: “We have a robust online strategy and from what we can see already, the appetite for online shopping is only increasing as people continue to turn to eCommerce for their needs during Covid uncertainties.”

Overall, however, there was a feeling of contentment amongst most SMEs. After 21 months learning important lessons, small businesses feel well-equipped for the new working world in 2022 and ready to overcome the challenges ahead.

Adam Goodman is Founder & MD, ACA Live, a creative production agency. Goodman said: “We’re gearing up to do more of the same, but I know we will all continue learning. As we know from ongoing developments, there are no guarantees with this pandemic, but we’re in the best possible position given our learnings of the past year.”

Looking ahead: what does 2022 hold?

There are obvious concerns for small businesses going into 2022, particularly given the emergence of the new Omicron variant that has seen a wave of cancellations across the hospitality industry.

Lee Murphy is managing director at The Accountancy Partnership, an online accounting service for UK businesses. Murphy advised: “As the UK prepares for a new year, it is important that all businesses, start-ups and beyond, are realistic about what they can achieve over the next 12 months, and seek professional support to give further advice when needed.”

But as a testament to the resilience and determination of UK SMEs, the majority of business owners we spoke to were feeling optimistic about the months ahead and the opportunities they would bring.

Nick Coleman, CEO and co-founder at Snaffling Pig, a snack food manufacturer, said that the challenges they’ve faced this year have been “why I love being a small business. The more challenges that get thrown at you, the more opportunities you find within it. We’re still small enough to flex quickly so we can move fast onto new opportunities and into new markets.”

Conclusion

Despite fears about the growing number of Omicron cases, the past two years have given most SMEs priceless life lessons on how to adapt to a crisis.

Entrepreneurs in the UK are predicting strong growth in 2022, with most business owners feeling confident as we head into the new year. Now, it’s time for the UK’s entrepreneurs to kick back and relax as the festive period arrives, and look forward to what opportunities the future holds.

Helena Young
Helena Young Senior Writer

Helena "Len" Young is from Yorkshire and joined Startups in 2021 from a background in B2B communications. She has also previously written for a popular fintech startup.

Included in her topics of interest and expertise are tax legislation, the levelling up agenda, and organisational software including CRM and project management systems. As well as this, she is a big fan of the films of Peter Jackson.

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