Rising business costs crippling British enterprise
By ECM Plus staff
ECM Plus +++ Small British firms are trapped in a vice of rising business costs, squeezing margins, choking growth and threatening their survival, according to a new study by Make It Cheaper and the Centre for Economic and Business Research.
According to the research, overheads have risen by almost a quarter over the past five years, and more than half (55 percent) of small business owners now warn that their company will simply not survive much longer if costs continue to rise at current rates.
Jonathan Elliott, managing director of Make It Cheaper said: “Rapid cost increases are placing the survival of small companies in jeopardy, and dampening the entrepreneurial spirit so crucial to economic recovery.”
The study is based on independent research among owners and managing directors of 750 British small businesses commissioned by business saving advisor Make It Cheaper, supported by macroeconomic modeling by CEBR.
The vast majority of small business owners identify rising costs as the most significant threat to their company this year (78 percent) and warn that the country has become an ‘unbearably expensive’ place to do business (81 percent).
CEBR and Make It Cheaper have modeled an inflation tracker for small business overheads – the Business Cost Index. The Index shows a 22.8 percent rise in small business costs over the past five years, compared to the ONS’ Consumer Price Index increasing by 19.4 percent over the same period.
According to the Make It Cheaper research, businesses themselves report an overall average rise in business costs of 4.5 percent year-on-year to July 2011.
In terms of individual overheads, the biggest risers predicted by the Index are transport costs, which are expected to rise 20.5 percent, energy bills, forecast to grow 8.5 percent and insurance premiums, set to rise 7.1 percent in 2011.
Rising costs over the past five years have damaged the growth of three quarters (74 percent) of small British firms, and will limit the growth of 78 percent this year, according to the research.
More than two thirds (67 percent) of firms have seen their profit margins hit by increasing costs over the past three years, to the tune of 22 percent on average, whilst approaching half (46 percent) have been forced to increase prices and nearly a quarter (22 percent) have cut staff.
Three fifths (59 percent) of small business owners claim that the high cost of doing business in Britain is acting as a disincentive for growth, whilst 86 percent believe it is damaging economic recovery.
Elliott added: “Government policy needs to curb business cost inflation this year.
For more information, advice and tools for small businesses to help manage overheads, visit Makeitcheaper.com