Why being in London is proving to be costly for SMEs

Costs for London-based businesses are among the highest in the world, according to the Federation of Small Businesses.


The capital is second only to Tokyo in a list of 23 global cities when costs including taxes, wages, redundancies, office space and the cost of living were compared.


The FSB’s first Small Business Index ranked London near the top of the table when considering the available talent pool and access to global markets.


Mixed results leave more questions


But the city scored poorly on issues including transport congestion and access to finance, leaving it ranked as the seventh lowest city overall.


Moscow is the worst place for SMEs to do business according to the Index, while Singapore and New York were the stand-out locations.


It highlights that London firms are struggling to manage costs, with high rents and other financial issues putting pressure on cash flows.


Sue Terpilowski, the FSB’s London policy chairman, said: “The report highlights some of the issues that members of the FSB voice regularly.


“Investment intentions can be stifled without sufficient access to finance and ever-increasing business rates put further pressure on cash flow.”


The FSB believes that a freeze on future business rates may go some of the way to resolving the issue.


It is also calling for a review of the whole business rates model, claiming the current system is “not fit for purpose”.


An additional part of their plan will see the Greater London Authority work alongside the government to improve competition in the banking sector.


More good news for small businesses


The creation of a new state-backed Business Bank could support £10 billion of lending to small businesses across a 5-year period.


London-based businesses are rapidly expanding and developing innovative ideas, but it seems that costs might be slowing their progress.


Those who are struggling could seek corporate restructuring processes or company voluntary arrangements to see them through periods of difficulty.


However, the current financial outlook appears to be good, which in turn could see London’s costs drop in the long-term.


By Phil Smith


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