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September 18, 2015

SMEs face "uphill battle" as business costs rise

SMEs face "uphill battle" as business costs riseBusiness costs have continued to rise during 2015, driven in part by increased staff costs, according to the latest research from the Forum of Private Business.

The Forum's 2015 Cost of Doing Business survey, carried out among its members, has found that firms are facing an "uphill battle" to make ends meet, despite positive signs of an economic recovery. It says that business costs are rising 5.7% ahead of inflation.

The findings show that 86% of businesses have seen an overall increase in their business costs over the past 12 months. The majority of the costs faced by businesses were regulatory, says the FPB.

However, staff was cited as the most costly area for 77% of SME polled. This was followed by insurance (60%), marketing (60%), support (54%) and energy (50%).

Worryingly, the report also identified that 37% of small business owners admitted to being unable to pass any rising costs on to customers, forcing them to cut their own costs to keep prices static. Just 1% were able to pass on costs in full.

Ian Cass, the FPB's managing director, said: "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 cash flow than late payment (21%) or unexpected price rises (20%)."

The cost of complying with regulation is having a detrimental affect on small firms, added Cass. "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."

He said: "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."

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