According to the latest Cost of Doing Business survey from the Forum of Private Business (FPB), energy costs are still the most commonly-seen increase. Despite signs that economic recovery is gathering momentum, the study shows firms are still feeling the squeeze despite signs that the economic recovery continues to gather momentum.
63% of businesses have seen an overall increase in their business costs, with 70% of businesses reporting an increase in energy costs, 65% in transport costs, 76% in marketing and 65% in a rise in staff costs. The report has also identified that 38% of small business owners admit to being unable to pass any rising costs onto customers, forcing them to cut their own costs to keep prices static. Chief executive of the FPB, Phil Orford says the major reasons for increases in prices are predominantly down to transport and energy prices rising.
He said that “The economic outlook continues to improve but the costs still remain an issue for our members and a key focus of our lobbying and support services.”
“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-enrolment of staff into pension schemes just around the corner, the affordability of significant wage rise coupled with increase pension contributions will be called into doubt.”
Whilst it is said that annual inflation has continued to fall the research also finds that prices have continued to rise faster for micro, small and medium-sized employers at 4.7 % – although this is less than the 6% figure reported by the Forum last year in research into business costs. This suggests that things are slowly improving. 81 % of firms indicate that rising business costs have been detrimental to their business, and 73 % have had cash flow issues as a result.
Despite the recent positive news surrounding the economy, rising business costs could continue to impact and potentially restrict the ability of many SMEs to take full advantage of the signs of recovery.