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Business costs rising ahead of inflation

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Many companies have seen their costs continue to rise across 2015, with staff costs being the most commonly reported increase, according to a new survey by the Forum of Private Business (FPB).

The latest survey of the forum’s members shows that 86% say they have experienced an overall increase in their business costs in the last 12 months. Staff costs are a common source of increased expenditure, with companies having to pay more to retain staff and factors such as auto-enrolment and an EU ruling on holiday pay being given as reasons.

Many businesses are not able to offset their increased costs by passing them on to customers, with 37% being forced to cut their internal cost or accept reduced profits in order to keep prices steady.

While the consumer price index has remained static, many small businesses have seen their costs rise 5.7% ahead of inflation. 37% of members identified the high costs they face as the biggest negative factor influencing their cashflow, ahead of late payment (21%) and unexpected pay rises (20%).

Ian Cass, managing director of the FPB, said:

“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.

“Most of the costs are based on regulatory issues and the biggest problem for our members is that 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.”

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