Business Costs Increasing for SMEs

The latest research to come from the Forum of Private Business shows that, despite a fall in inflation, small businesses have faced continued rising costs during 2014.

Among the results published in the Cost of Doing Business Survey, it was revealed that 63% of businesses have seen an overall increase in their costs. The largest increases were seen in the areas of energy, transport, marketing and staff.

Phil Orford, Chief Executive at the Forum, said: “This is a timely reminder that despite all the talk of a need for above-inflation wage rises, businesses continue to feel the strain of rising costs.

“With the auto enrollment of staff into pension schemes just around the corner, the affordability of significant wage rises coupled with increased pension contributions will be called into doubt.”

The effects of rising costs on UK small businesses

As a direct result of these increased costs, small business owners have been struggling with various issues such as cash flow problems and inhibited plans for growth and investment. The study found that, while the annual inflation has fallen from 2.7% to 1.6%, smaller firms are dealing with price rises of around 4.7%.

According to the report, 38% of companies were unable to pass any of the increased costs onto their customers, meaning potentially damaging cuts and compromise had to be made in other areas of the business. The majority of SMEs questioned as part of the survey (82%) expect that costs will continue to increase, with 16% anticipating this rise to be ‘significant’.

There are a number of situations that have exacerbated this problem for small businesses such as increased price competition, excessive administrative demands and late payments.