Cost of doing business rising thanks to energy cost increases says Forum of Private Business

The cost of doing business has continued to rise during 2012, with energy costs still the most commonly seen increase among small and medium enterprises, research by the Forum of Private Business has shown.

The Forum’s latest quarterly Referendum survey, carried out among its members, shows 95 per cent of businesses have seen an overall increase in their business costs.

Some 85 per cent of businesses reported an increase in energy costs, 88 per cent in transport costs, 82 per cent a rise in marketing costs, and 73 per cent a rise in the cost of raw materials/stock.
 
The report identified around one in three business owners who admitted to being unable to pass rising costs onto customers, forcing them to cut their own costs to keep prices static.
 
Forum senior policy advisor Alex Jackman said: "The major reasons for increases in prices are down to VAT and energy prices rising, coupled with the weakness of sterling for importers.
 
"Unfortunately, it doesn’t look as if there is going to be any respite from energy hikes any time soon. Oil prices have started rising again having dipped in the summer, and now we have the likes of British Gas raising prices for customers too. On the horizon we have a 3p a litre increase in fuel duty scheduled for January.
 
"It could be that we are shaping up for another winter of discontent, particularly if the mercury plunges this winter and firms are hit with huge heating bills and a fall in trade like we saw three years ago. Many firms are already battling the economic elements, but if the weather turns it could spell the end for those already walking a cost tightrope."
 
While annual inflation has dropped from around five per cent to three per cent, the research also found small business inflation running at 6.7 per cent. This means prices have risen far faster for micro, small and medium-sized businesses than for the rest of UK society, although this is less than the 8.3 per cent figure reported by the Forum last year in research into business costs, suggesting things have improved albeit slowly.
 
Wage inflation is around the same level as underlying inflation as reducing staff costs has been the only way for some businesses to continue trading.
 
Tight credit restrictions have meant that businesses have not been able to access finance to deal with increased costs and 41 per cent feel that they now have less leeway in coping with business costs than they had last year.
 
Four fifths - 81% - of firms indicated that changes in costs have been detrimental to their business. Two thirds have reported cash flow issues as a result, while 56 per cent reported it has been detrimental to employment levels. Worryingly, 69 per cent feel that it has inhibited growth ambitions.
 
And according to those business owners quizzed, the future looks set to remain bleak with 4 in 5 expecting prices to continue to increase in 2013, and 14 per cent expecting a significant increase.
 



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