Forum research suggests business costs rising 5.7% ahead of inflation
Business costs have continued to rise during 2015, with staff costs still the most commonly seen increase among small businesses, according to the latest research from national business group, the Forum of Private Business.
The Forum’s latest Cost of Doing Business survey, carried out among its members, shows firms are still facing an uphill battle to make ends meet, despite positive signs of an economic recovery.
The results showed that 86% of businesses have seen an overall increase in their business costs over the last 12 months. However, only staff costs are more frequently mentioned than in a similar survey last year; part of this is due to market forces – businesses having to pay increased salaries to attract and retain staff, but the majority of the costs faced by businesses were regulatory – the cost of auto-enrolment on small employers and the cost of the EU ruling on holiday pay.
Worryingly, the report also identified that 37% 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 1% were able to pass on costs in full.
Ian Cass, managing director of the Forum of Private Business, said: “CPI has remained static at 0.0%, but small firms continue to absorb these price increases. We cannot see how this can continue as 37% of our members feel that the constant high cost of doing business is a greater detriment to their cashflow than late payment (21%) or unexpected price rises (20%). 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.
“27% of business owners reported that reducing red tape was the solution, but there has been no noticeable change over the last decade; when policy makers have prioritised deregulation – it has, if anything, got worse. 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% rate.
“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 1 in 7 companies were looking at prices and costs when we undertook the survey. The Forum helps its members with this as it is not always easy to compare prices between suppliers.”
The entire report can be found at: https://www.fpb.org/referendum-member-survey