Small businesses across the UK are now facing pressure comparable to that of the COVID-19 pandemic. And believe it or not, it’s possibly even worse. That’s a pretty wild sentence to be writing in 2026, but according to a new report from the House of Commons Business and Trade Committee, we’re back in the thick of it.
COVID brought chaos, sure. But at least it was polite enough to turn up with a name badge. This new situation is more covert. What businesses are dealing with now is far better at disguising itself as “just how things are”. Death by a thousand ordinary costs.
What’s actually going on?
Some of the problems are simply the wider business climate doing what it does best: making life harder for the people trying to keep the lights on.
The high street keeps shrinking. Crime keeps happening. Policy changes keep turning standard processes into admin obstacle courses.
But let’s be honest. The real problem is cash. In fact, some of the most pressing issues identified in the report include:
- Late payments
The report calls cashflow “the heart of the problem,” and late payments are sitting on the throne. It’s now linked to 38 UK business closures every day, with Sage estimating that small businesses were owed £112 billion by the end of 2024, with 44% of invoices paid late. That works out at around £42,000 per business. So yes, “we’ll pay next month” has officially stopped being mildly annoying and started becoming economically feral. - Tax and compliance
The tax bill is one thing. The paperwork circus surrounding it is another. Small businesses are losing 242 million hours a year to compliance, at a cost of nearly £25 billion. Some firms told the Committee they now spend more time doing paperwork than doing the trade they actually started the business to do, which is deeply unsettling on practically every level. - Energy costs
Energy bills still haven’t gone back to anything even remotely sensible. In 2024, average electricity costs were close to double what they were three years earlier, and plenty of SMEs have had months when the bill suddenly jumps and takes a chunk as big as one or two wages. When you’re already waiting on overdue invoices and trying to keep on top of rising tax costs, that sort of increase hits hard and leaves less room for everything else.
Why does it all feel worse?
Fair question. If businesses got through COVID, why does this feel darker, somehow?
Because the COVID problems were brutal but temporary. These ones are sticky.
What makes this whole thing especially worrying is that none of these issues look overly dramatic on their own. Late payments feel like part of doing business. Rising energy bills get shrugged off as “just where the market is.” Tax admin is frustrating, but it’s easy to treat as another annoying job on the list.
Because each problem looks ordinary, there’s no obvious emergency response built around it. That’s the trap.
During COVID, the situation was so clearly extreme that support plans were put in place quickly. Businesses had access to grants, loans, furlough support, rate relief, and greater recognition that this was extraordinary.
This time, the pressures are every day. Familiar. Easy to normalise.
But when late payments, tax burdens, and rising energy costs all hit at once, the combined impact can be every bit as damaging as a major crisis. The difference is that there’s no formal safety net waiting in the wings, because no single part of it looks unusual enough to trigger one.
It’s this mess of everyday pressures that led Rt Hon Liam Byrne MP, Chair of the Business and Trade Committee, to warn: “Many small businesses are now operating under pressures comparable to those experienced during the Covid pandemic, but this time without an emergency support framework in place.”
And unlike the COVID-era issues, these are not pressures that naturally ease off after an event. Left alone, it all keeps stacking up. Bills continue to rise. Payments continue to get slower. Compliance and regulation continue to grow.
And this all raises a serious question: what do you do before the pile-up becomes unmanageable?
What’s the plan?
SMEs make up 99.9% of all UK businesses. They account for 60.6% of private sector employment and 48.4% of turnover. In other words, they’re not just some side quest in the economy. They’re the main game.
And yet they are the ones carrying the heaviest load.
The nasty twist is that many businesses can no longer just put prices up to cope. Customers have limits, and in plenty of sectors, those limits have already been reached. So, the cost gets swallowed instead. Margins shrink. Cashflow tightens. Decisions get delayed. Growth stalls. Then suddenly, a solid business is spending its days playing financial whack-a-mole.
In 2024, 280,000 UK businesses closed. That number should be setting off alarms everywhere.
And in some ways, it is. The Committee hasn’t been shy about what needs fixing.
It wants faster late-payment reform, including mandatory 30-day payment terms by the end of this Parliament, so small businesses are not left acting as interest-free banks for bigger firms. It’s also pushing for Fair Payments Code data to be linked to Companies House, so businesses can see exactly who they are dealing with before signing on the dotted line.
On the tax side, the recommendation is a 25% cut in compliance costs by the end of this Parliament, which would claw back time, money, and at least a few million collective headaches. That means fewer hours being burned on admin and more time spent actually running the business.
And then there’s energy, where the recommendation is proper SME relief, fairer pricing, and stronger protection for smaller firms. At the moment, many of the little guys are still paying more per unit than the bigger players, which makes an already difficult trading environment even harder.
It’s all sensible. But none of it helps if your cashflow problem hits before Parliament gets its act together.
But you can always turn to us for fast, alternative financing in the form of working capital loans, CBILS and Bounceback loans and VAT and HMRC loans.
We’re here to help
If late payments are choking cashflow, tax and energy costs are eating into margins, and the pressure is starting to shape the wrong decisions, sitting back and hoping it all calms down is not exactly a strong survival strategy. Never mind a strong growth strategy!
At Punk Business Loans, we help businesses get the money they need while it can still do some real good.
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