Business cost increases outpace inflation

Business costs have drastically outpaced inflation in the past few years, with the UK’s small firms hit hardest, according to new research.

A report produced for the Federation of Small Businesses by the Centre for Economics and Business Research revealed that outgoings have surged by as much as 12.5% in the five years to 2016.

That compares with a cumulative CPI inflation measure of 7.7% in the same period, with changes to levies, tax relief and employer obligations reportedly behind the increase in costs.

These cost implications can severely limit the ability of small firms to grow and compete and the FSB has suggested that the potential impacts of the new regulations were not considered prior to implementation.

With 5.5 million SMEs in the UK, the FSB has called on the Government to incentivise businesses to help drive the economy forward.

The construction sector has been particularly hard hit by cost increases, as the report suggests that small construction firms have seen costs surge by 34% as a result of government decisions.

It is also suggested that labour intensive sectors are facing rising costs following increases to the minimum wage, the need for pension auto-enrolment and higher employer national insurance contributions.

All of these factors have placed pressure on the finances of smaller firms, although a wide range of alternative finance options do exist to support those in difficulty.

Those facing an uncertain future may also wish to seek assistance from corporate advisory services on aspects such as business regeneration, restructuring, refinancing or insolvency.

The annual investment allowance has acted as one incentive for businesses, but the rate relief has an eligibility threshold and some businesses have voiced concerns that it may drop.

This uncertainty can mean that some businesses do not take advantage of available relief, even though they are entitled to it.

And while managing finances has always been important for smaller firms, current market conditions make it even more essential.


By Phil Smith


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