Couple eating food

Open for business again

Seven challenges faced by small businesses in 2021 (and how to rise to meet them)

While the easing of final restrictions has been delayed for a few more weeks, the UK is (mostly) starting to feel open for business again. As many start to return to work and look forward to a more relaxed summer, here we explore some of the challenges faced by a variety of small businesses, with some practical advice on how to solve them.

1. Managing cashflow and everyday expenses

The simplest to explain, but sometimes not the easiest to manage – many businesses may be facing short-term cashflow issues as a result of the past few months. Despite this, Barclaycard Payments' latest SME Barometer indicates that business customers are feeling cautiously optimistic about their prospects for the coming year, predicting a 9.8 per cent increase for this quarter compared to Q1 2021. In response to the mounting needs of SMEs, Barclaycard has just launched its new fee-free Barclaycard Payments Select Cashback credit card, offering one per cent cashback on all purchases, alongside a 56-day interest-free period.

2. The ‘al fresco’ experience economy

Meeting the challenge of adapting to evolving restrictions has been tough for the hospitality sector although there are reasons to be optimistic; when restrictions eased on 17 May to allow indoor dining, transaction data from Barclaycard showed growth of 58 per cent for restaurants from the previous week. With demand for tables currently very high as UK diners seek to meet up with friends and family, the hospitality sector is poised to bounce back this year. However, SMEs should be mindful of changeable conditions and ensure they stay flexible in the future and continue to give customers a great experience come rain or shine.

3. Uncertainty in the travel industry

It’s no secret that the travel industry has been hit hard by the global pandemic, especially considering international restrictions. However, with many UK holidaymakers keen to get away somewhere this summer, staycations are proving to be a popular choice. According to data from Barclaycard more holidaymakers either embarked on or booked staycations in May, with resorts and accommodation showing strong growth of 25.5 per cent. Perhaps due to the vaccine rollout, older consumers shelled out the most on staycations, with spend from those aged 50-64 up 40.5 per cent, compared to a 13.1 per cent decline among 16-24-year olds.

4. Summer spending uplift

As the great British summer finally arrives, the forecast also looks bright for retailers as business leaders predict a possible summer spending frenzy. As restrictions hopefully lift in the coming weeks, SMEs should make the most of opportunities now that there is an element of recovery. In April this year, research from Barclaycard demonstrated that 42 per cent of customers are more likely to continue to shop local after the pandemic than before, identifying a welcome shift in consumer loyalties for SMEs.

5. Abandoned baskets

This phenomenon of filling one’s ‘fantasy basket’ with desired products before abandoning it at or during checkout is costing UK businesses. Barclaycard Payments reveals that shoppers have discarded £39.4bn worth of items during the pandemic so far, citing high delivery costs and lengthy payment processes amongst likely reasons to abandon purchases. Yet with more people than ever (34 per cent) reliant on online shopping, savvy SMEs should streamline both their online customer experience and payments process to assuage the likelihood of basket abandonment and maximise revenue.

6.  New regulations

On top of everything the world has been though over the last year and a half, businesses still have to navigate their way through new regulations such as Brexit and the European Union’s revised Payment Services Directive (PSD2) which was introduced to protect individuals and businesses when they pay online. Strong Customer Authentication (SCA) was a part of this, specifically designed to make online payments more secure. The deadline has been extended, but with only a few months to go before checks begin for UK transactions, businesses must urgently build, test and deploy a compliant solution. Barclaycard Transact is our solution that can help – it manages fraud, maximise sales, and helps remove the extra steps that customers could incur when shopping online.

7. Digital transformation

Unsurprisingly, digital has played a key role in helping many small businesses to operate online throughout the pandemic. With this in mind, Barclaycard research demonstrates that 29 per cent of SMEs plan to invest in new technology in 2021, and 50 per cent have already invested in digitally upskilling their staff. By operating competently online and investing in the payment experience, businesses can travel further along the road towards safeguarding their future.

“Undoubtedly this it’s been a challenging time for UK businesses, but for agile SMEs willing to adapt and evolve, there is a positive outlook ahead. The easing of restrictions has already provided a welcome boost to many sectors and with the economic outlook set to improve further, many small businesses are hopeful for the year ahead. But SMEs continue to need our support now more than ever, to not only survive but thrive in the future,” said Konrad Kelling, Managing Director, Barclaycard Payments.