Increasing salaries push small business costs up

Annual cost inflation increased in the final quarter of 2013 while investment in business continued to grow, according to a new report.


Aldermore Bank’s quarterly SME Monitor said that the changes came against a backdrop of improved consumer confidence.


The research was compiled by the Centre for Economics and Business Research (CEBR) and showed that salaries in Q4 were up by 1.2%.


Meanwhile, Labour costs accounted for roughly 30% of total business expenses while cost inflation was pushed up to 0.9%.


The figure had stood at 0.7% previously but the new cost inflation rate remains below the figure seen in 2012.


Where do the major industrial sectors fit in?


Cost increase in the construction sector increased the most, while manufacturing businesses saw a 0.2% increase year on year –attributed to lower input cost inflation on basic products.


“With GDP projected to rise by 3.3% compared to 2013, it is welcome news that growth is seen to be coming from all 3 major industrial sectors,” said CEBR senior economist Rob Harbron.


“One particularly encouraging trend that may emerge over the medium term is that of reshoring: with 1,500 manufacturing jobs identified as having been returned to the UK since 2011, a rise would be a valuable support to a sustained recovery,” he added.


The number of companies filing for corporate insolvency procedures stood at 3,800 in Q4 2013, suggesting that a threat remains for businesses that are not yet clear of the recession.


That figure is slightly down on the number of insolvencies for a year previously, but with a significant number of businesses still requiring assistance, a considered action plan is required by many.


Cutting operating costs – by saving on energy costs for example – is a way to nullify the potential cost increases, while such measures also fit in with efforts to sustain the environment.


By Phil Smith


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