Interviews

Businesses face uphill battle to survive due to fast-rising costs

3 min read

15 September 2015

With costs associated with business rising far above inflation, companies throughout the UK are being hit by staff wage rises and more regulation.

The Forum of Private Business’ latest “Cost of Doing Business” survey found that businesses have seen costs rise 5.7 per cent ahead of inflation over the last 12 months.

A huge 86 per cent of business leaders said they had seen an overall increase in costs.

Staff costs were the most commonly seen increase among small businesses, as each paid higher salaries to attract and retain employees.

However, the majority of costs faced by businesses were regulatory particularly the cost of auto-enrolment on small employers and the cost of the EU ruling on holiday pay.

The report found that 37 per cent of small business owners admitted to being unable to pass any rising costs onto customers, forcing them to cut their own costs to keep prices static. Just one per cent said they were able to pass on costs in full.

Again, 37 per cent of survey respondents said that they felt that the constant high cost of doing business was a greater detriment to their cash flow than late payment or unexpected price rises.

“Firms are still facing an uphill battle to make ends meet despite positive signs of an economic recovery,” said Ian Cass, the Forum’s managing director.

“CPI has remained static at zero per cent, but small firms continue to absorb these price increases. We do not feel that rail prices or energy costs will reduce significantly in the short term and insurance is likely to go up in November as insurance premiums are taxed at the new 9.5 per cent rate. 

“We cannot see how this can continue. Following the diktats of parliament, wage increases are due to rise significantly above inflation over the next few years, but with labour intensive firms reporting far higher cost rises it is difficult to see how this is sustainable unless there are significant changes.”

Cass said that a quarter of business owners, 27 per cent, indicated that reducing red tape was the solution but stressed that there had been no noticeable change over the last decade.

He added: “Most of the costs are based on regulatory issues and the biggest problem for our members is that the costs cited this year have an impact on the bottom line and they are unavoidable. 

“For other supplier costs, we encourage business owners to assess value for money very carefully and look at the costs regularly – it is reassuring in some ways that one in seven companies were looking at prices and costs when we undertook the survey. The Forum of Private Business helps its members with this as it is not always easy to compare prices between suppliers.”