Two in five SMEs depend on Christmas for a quarter of their annual revenue
With Christmas around the corner, small and medium-sized businesses across the UK are hoping for a much-needed surge in customer spending.
Research from iwoca, one of Europe’s largest small business lenders, reveals that more than two in five (44%) SME owners expect to generate over a quarter of their revenue during the festive period.
More than one in five (22%) predict that Christmas will account for over half of their year’s takings – increasing to nearly two in five (37%) for small businesses who work in the retail industry.
Expectations higher than previous years
While hopes are high for SMEs during the festive period, they follow on from lower-than-anticipated Christmas revenues in previous years.
A quarter (26%) of small business owners report that their Christmas revenue in 2022 was lower than expected, down from three in 10 (32%) the year before. In contrast, just one in ten (13%) saw higher than expected sales in 2022.
Even amid sluggish Christmas sales, SMEs remain resilient, with two-thirds (66%) saying they don’t think that poor revenue during the Christmas period will mean they will have to lay off staff.
Pressure is on for retail SMEs this Christmas
Increased Christmas spending on everything from parties to presents means it is traditionally a lifeline for many smaller companies. For two in five (39%) SMEs, the holiday season injects important revenue for their business, that could make or break their end-of-year success.
The stakes are even higher for SMEs in the retail sector, with three in five (60%) retail SME owners saying that Christmas is the most important time of the year for their business. Despite hopes for a festive boom, a quarter of SMEs (26%) worry that trading will fail to generate the revenue their business needs, jumping to half (49%) of retail SMEs.
Robert Ward, owner of Alleyn Park Garden Centre in South East London is hoping to sell his new stock of Christmas trees. He said: “As a small garden centre our business is highly seasonal. That means I do well for six months of the year, and the rest of the time I’m just ticking over. So the Christmas period is an incredibly important time for the business in the middle of some very quiet months. This last year has been tough for business – my turnover is down almost 40%. People have been more and more careful about their spending and unfortunately, gardening comes up second best. Revenues will probably be down 15-20% this Christmas compared to the last few years.
“There’s also more and more competition each year – it’s hammering the small garden centres like mine. Christmas tree sales are majorly important for the business, so without them, December would be a disaster. We’ll get by this Christmas, I’ll cover my wages and overheads, but I’m not going to make any profit.”
Seema Desai, chief operating officer at iwoca, added: “There’s immense pressure for small businesses to turn a profit during the festive season. Our research shows that SMEs, especially those in the retail sector, expect to generate a huge proportion of revenue in an incredibly narrow window. It is one of – if not the most – important times for many businesses. However, the cost of living crisis continues to put pressure on consumers who are likely to be cutting back on non-essentials this Christmas. This will no doubt have a knock-on effect on SMEs who are relying on this time of year to recoup some of their losses.”