SMEs in rising costs shocker

Small business costs have shot up 23% in five years. So who's really queuing up for David Cameron's enterprise drive?

by Dave Waller
Last Updated: 09 Aug 2011

Rising costs are squeezing margins, choking growth and threatening the survival of small businesses. No news there you may say, as you stare at your electricity bill, but even the most glaringly obvious facts can look startling when someone shines a light on the numbers.

A study by ‘savings advisor’ Make It Cheaper and the Centre for Economic and Business Research found that small business overheads have risen by a staggering 22.8% in the past five years, with as many as 55% of SME bosses now warning that their company won’t survive much longer if things keep going at the current rate.

For a Prime Minister desperate to kick some life into UK plc, and facing an economy where growth has slowed to 0.2%, such news must be increasingly difficult to spin. When more than half of small business owners are apparenlty openly fearing for their future, it’s hardly a good ad for the enterprising spirit that David Cameron is so keen to see driving our recovery.

Of course, the PM may wish to highlight that such findings are very much in the interests of a ‘business savings expert’ like Make It Cheaper, which has a massive phone number for ‘cheaper gas and electricity’ splashed across its website.

Yet there’s more in the research to send the PM dizzy on his next promotional tour of the tech hub at Old Street roundabout: 78% of small business owners say rising costs are the most significant threat to their company this year, with a hefty 81% warning that the country has become an ‘unbearably expensive’ place to do business.

Rising costs over the past five years have damaged the growth of 74% of small UK firms, and will limit the growth of 78% this year. Meanwhile 46% have been forced to increase prices and 22% have had to cut staff. And it’s not set to get any better soon either. Transport costs are expected to shoot up 20.5% this year, energy bills 8.5% and insurance premiums 7.1%.

All of which suggests that small businesses may have to live with rising costs for a while. Yes they can make tiny savings here and there, but there’s not much to be done about sweeping macro-economic trends. But hopefully such stats will at least add pressure to George Osborne to come up with a proactive and viable growth plan.

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