Business costs continue to rise, with inflated energy prices proving the most burdensome for small firms in 2013, according to research from the Forum of Private Business.
Small businesses are struggling to make ends meet despite positive signs of an economic recovery, the latest Cost of Doing Business report from the Forum of Private Business has found.
According to the 4,000 respondents to the survey, 94% of businesses have seen an overall increase in their business costs. Of these, the cost of gas and electricity are the biggest bugbears with 87% reporting an increase in energy overheads. However, 83% also saw a rise in transport costs, 78% are spending more on marketing and 69pc have experienced a rise in the cost of raw materials/stock.
The cost of petrol, rising transport costs and the spiralling price of energy are proving extremely challenging for small businesses. These, coupled with the continued weakness of sterling, are putting downward pressure on balance sheets. And these firms are unable to simply pass on these costs to customers. Despite evidence of a muted economic recovery, 41pc of small business owners said that they were absorbing the costs themselves. Just 2pc were able to pass on costs in full.
Annual inflation may have fallen from 3pc to 2.7% but this research shows that prices have continued to rise for micro, small and medium-sized employers, increasing by 6%. This is less than the 6.7% figure reported by the Forum last year, however, suggesting that the environment for SMEs is gradually improving. Nevertheless, 83% of those surveyed expect the situation to worsen next year.
Credit restrictions are also an issue, with 26% of businesses reporting less leeway in coping with business costs than they had last year.
The report has found that 81% have experienced a detrimental effect to their business as a result of these rising business costs. 73% have had cash flow issues and 51% of firms have struggled to to invest in new training or plant. 51% also reported that these sky-high overheads have prevented them from employing new staff and 63% feel that it has hampered their growth plans.
More worryingly, the most frequently cited factors exacerbating the problem of rising costs were customers paying late (59%) and competitors offering products below cost price (51%). Excessive administrative demands forced on businesses by the government, banks and customers meant that 35% of businesses have not been able to focus on business activities. Changing payment terms has been a problem for 24% of businesses in dealing with suppliers, and 26% in dealing with customers.
“As well as positive action on late payment we’d like to see further steps to help small firms with business overheads,” said Alexander Jackman, the Forum’s head of policy. “We’d like a freeze on business rates and small business multipliers next year. An extension of small business rates multipliers until the end of the current parliament would also be welcome and we’d like to see the government commit to undertaking independent research into business rates.
“While the Chancellor’s announcement of a fuel duty freeze at the Conservative Party Conference was a welcome move, we feel that further action should be taken to investigate where further savings could be made across government to ensure that fuel duty is not raised again before the end of this parliament.”