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SMEs face rising business costs

The majority of small businesses in the UK (95 per cent) have seen a rise in business costs over the past year, according to research from the Forum of Private Business (FPB).

According to its latest quarterly referendum survey, transport costs were the most commonly cited increase (88 per cent), followed by energy costs (85 per cent), marketing costs (82 per cent) and the cost of raw materials and stock (73 per cent).

Despite this month's fall in inflation to lowest level in nearly three years, the FPB said that many businesses were 'still facing an uphill battle to make ends meet.'

A rise in VAT and energy prices, combined with the weakness of sterling for importers, was blamed for the overall increase.

The Forum's senior policy adviser Alex Jackman warned that respite from energy price hikes in the near future was unlikely, with oil prices, utility bills and fuel prices all predicted to rise.

"It could be that we are shaping up for another winter of discontent, particularly if the mercury plunges this winter and firms are hit with huge heating bills and a fall in trade like we saw three years ago," he said.

"Many firms are already battling the economic elements, but if the weather turns it could spell the end for those already walking a cost tightrope."

Although CPI inflation has now dropped to 2.2 per cent, research suggests that small business inflation sits at 6.7 per cent, rising fastest for micro businesses and SMEs than the rest of the UK society. The figure has however improved slightly from the 8.3 per cent reported by the Forum last year.

Worryingly, one in three businesses also admitted they were absorbing rising costs or cutting their own costs in order keep customer prices static.

Businesses said that late payment from customers and competition from other businesses offering products below cost price were exacerbating the tight conditions.

The FPB is now calling for the Government to consider freezing business rate rises due in April next year.