Companies are tightening their belts as cost pressures increase but there is still cautious optimism in the air.

Rising interest rates and high costs have forced many firms to cut spending, freeze pay increases and restructure operations as they grapple with cost pressures, new research shows.

A survey of 605 UK mid-sized businesses found that 52 per cent had already frozen salary increases, with a further 36 per cent planning to do so.

Almost half had also frozen workforce bonuses and cut staff numbers. Many companies also revealed they had frozen recruitment.

However despite the economic landscape, businesses continue to look for solutions to improve performance. More than half of those quizzed have invested in productivity, efficiency and automation, with large numbers looking to go down the same route.

And the latest official figures have shown a slight real wage increase for the first time in more than a year, coupled with a fall in energy costs and usage over the summer, which could mean that consumers will soon have more disposable income to spend.

Simon Gray, head of business at the Institute of Chartered Accountants in England and Wales (ICAEW), said: “The survey findings echo sentiment we hear through ICAEW member networks.

“Businesses have faced a squeeze on margins due to rising input costs, including pay awards, alongside difficulty in passing on price increases.

“Costs have come sharply into focus as businesses continue to grapple with a challenging economic environment.

“There are signs that recruitment activity has cooled and companies that will have already awarded pay increases in response to the cost-of-living crisis may find continued awards unsustainable.”

Almost three quarters of the businesses surveyed anticipated raising additional funds over the next year to tackle cost pressures. However, a significant majority also expect lending terms to be much tighter.

Simon Gray added: “Businesses have reported a ‘wait-and-see’ approach to investment driven by ongoing economic uncertainty and challenges in accessing and servicing finance, which has curbed productivity gains that could come from technology and automation.

“There is appetite for investment, but many companies appear to be holding fire until conditions improve.

“ICAEW’s Business Confidence Monitor (BCM) is back in positive territory with all eyes now on Q3 results. As winter approaches, businesses remain cautious about the potential for energy price rises and any further increase in interest rates.”

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Lancashire companies seeking funding to fast-track their growth can now visit a new online hub to get a better understanding of the options open to them.

The new funding hub has been launched by Lancashire County Council and the Lancashire Enterprise Partnership (LEP).

As well as information about a variety of funding options it also includes insight from funding experts as well as business owners and managers who have been on their own funding journey.

The hub has been designed to provide a single-entry point so people running businesses in Lancashire can better understand their options for external finance.

It is in response to a report commissioned by the LEP and conducted by economic and social research consultancy EKOS about Lancashire companies’ use of external finance.

Lancashire Funding Hub can be found on the Boost; Lancashire’s Business Growth Hub website.

It includes both debt and equity finance such as Lancashire Enterprise Partnership’s Growing Places Fund, Innovate UK funding, the Northern Powerhouse Investment Fund and Rosebud Finance.

The hub will also feature inspirational content including Q&As from well-known funding providers in Lancashire and companies from across the county that have grown successfully using external finance.

Debbie Francis, chair of Lancashire Enterprise Partnership, said: “By better connecting Lancashire’s funding community with businesses, we will not only inspire more homegrown companies to use external funding to grow, we will also enhance Lancashire’s economic offer to wider audiences.

“For example, the Funding Hub will help Lancashire create a stronger proposition for foreign owned companies who want to base themselves here and expand.

“In addition, it will allow us to promote LEP initiatives such as the £20m Growing Places Fund and encourage start-ups and scale-ups from a variety of sectors to explore the wide range of funding pathways which are available through our partners.”

Businesses can find the hub on the Boost website here: https://www.boostbusinesslancashire.co.uk/business-support/lancashire-funding-hub/

If you would like to conduct further discuss funding options contact me on 01772 43000.

Despite the cost-of-living crisis and the squeezing pressures of inflation the North West’s entrepreneurial spirit continues to shine.

The number of start-ups in the region is on the rise, according to new figures from the UK’s insolvency and restructuring trade body R3.

Its research has revealed that 40,300 new businesses were created in the region in the first six months of 2023.

That is 13 per cent more than in the previous six months and three per cent more than in the same period last year.

The figures, which are based on data from Creditsafe, show that the North West continues to create more new businesses than any other region except Greater London and East Anglia.

And the North West also accounts for around one in 10 of all new businesses created in the UK.

We echo the comments of R3’s North West chair Fran Henshaw, who points out business creation is “critical” for the region’s economy.

Start-ups play an important role in all sectors of the economy. As well as deepening and strengthening the pool of business talent many of them bring new ideas and technologies to the table and are at the cutting edge of innovation.

The start-up figures are to be welcomed but let’s be under no illusions. Setting out with a new business in today’s economic conditions is extremely challenging.

Knowing your figures and keeping in control of cash flow is vitally important. Be aware of any early alarm bells and act sooner rather than later.

The availability of sound business and financial advice can also mean the difference between success and failure.

It’s vital to seek out the experts that can help new businesses navigate those early years, whether that is by helping develop a clear plan, advising on budgets and forecasting or the adoption of digital support tools.

It’s not just start ups feeling the pressure. Lancashire Business View magazine’s annual Hot 100 list has highlighted the challenges facing the county’s most profitable SMEs.

The uncertainty created by war in Europe, crippling energy bills, soaring inflation, the cost-of-living crisis and major skills shortages have had their effect in the past 12 months.

The Hot 100 figures, published earlier this month, show a 12 per cent drop in profit before tax compared to the previous year and a significant 26 per cent fall in employees.

The removal of Covid government initiatives such as loan schemes and furlough funding has also had an impact on the overall profit number.

However, there is still room for optimism. The profit figure is an impressive £254m and total sales rose by £138m. Total revenues are also at an all-time high as businesses continue to show remarkable resilience.

• To discuss any issues raised by this article including access to start-up support please contact me on 01772 430000

The rule that allows people to leave a tax-free retirement pot when they die is under threat from a Treasury shake-up.

The proposals would end the benefit for tens of thousands of UK households and follow April’s scrapping of the lifetime allowance (LTA) on tax-free pension contributions.

At present, under reforms introduced in 2015, anyone inheriting a defined contribution pension pot from a person who died under the age of 75 is able to benefit from a tax-free lump sum and make regular withdrawals, while keeping funds invested.

The Treasury has now published a consultation document looking at making changes that would mean that from April 2024 beneficiaries would be charged income tax on ongoing withdrawals from inherited pots.

It says that the proposals outline only one possible approach, while pension experts are calling for a proper debate before any move is made to remove the benefit.

In his March Budget chancellor Jeremy Hunt announced plans to increase the pensions’ annual tax-free allowance from £40,000 to £60,000 along with abolishing LTA – previously set at £1.07m.

The measure was aimed at discouraging early retirement by enabling people who had crossed the threshold to continue saving into their pensions tax free.

Mr Hunt said that move would incentivise “our most experienced and productive workers to stay in work for longer”.

Meanwhile, Inheritance tax (IHT) receipts in June hit a record high. Official figures show that the Treasury collected £795million, making it the highest monthly total on record

IHT receipts for April to June 2023 were £2billion, which is £0.2bn higher than the same period a year earlier. Industry experts are also predicting a record-breaking year.

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The amount of unpaid UK tax has remained at an all-time low of 4.8 per cent, HM Revenue and Customs (HMRC) has revealed.

Its annual statistics also show that small businesses account for more than half the reported gap.

HMRC’s ‘Measuring Tax Gaps’ publication estimates the difference between the total amount of tax expected to be paid and the total amount of tax actually paid.

The report puts small businesses firmly in HMRC’s spotlight. It highlights that errors and failure to take reasonable care among small businesses led to £20.2bn of the £36bn tax gap.

Jonathan Athow, HMRC’s director general for customer strategy and tax design, said: “The tax we collect funds the country’s public services and we want to ensure everyone pays the correct amount. These figures show most taxpayers and businesses pay what they should.

“This important research enables us to better help those making common mistakes or failing to take sufficient care, as well as tackling the minority deliberately hiding their income.”

The report shows a long-term reduction in the tax gap. Errors, a lack of sufficient care, evasion and criminal attacks all contribute to the tax gap, which has fallen from 7.5 per cent in 2005 to 2006 to 4.8 per cent in 2021 to 2022.

In monetary terms, the most recent figures put the difference at £36bn for the 2021 to 2022 tax year. This has increased from £31bn in 2020 to 2021.

The gap has remained at 4.8 per cent because estimated tax liabilities rose from £643bn in 2020 to 2021 to £739bn in 2021 to 2022.

The report also reveals that criminals were responsible for £4.1bn of the gap with large and mid-sized businesses responsible for £7.7bn. Wealthy individuals account for five per cent (£1.7bn).

Income Tax, National Insurance contributions and Capital Gains Tax make up 35 per cent (£12.7bn) of the total.

Corporation Tax is now estimated as the second largest component at 30 per cent (£10.6 billion). New data has increased our understanding of the CT tax gap, resulting in revised estimates.

The VAT gap continues a long-term downward trend falling from 14 per cent (£11.9bn) in 2005 to 2006 to 5.4 per cent (£7.6bn).

Failure to take reasonable care (30 per cent), error (15 per cent), evasion (13 per cent), legal interpretation (12 per cent) criminal attacks (11 per cent) and non-payment (nine per cent) are among the main behavioural reasons for the tax gap.

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