Inflation squeeze
Jun 29 2010
Small businesses are feeling the pressure at both ends
Small businesses are being hit by a double whammy of sluggish consumer demand and rising prices.
Costs increased by 6.5 per cent for small firms over the last year, finds research from Warwick Business School and insurance company MORE TH>N BUSINESS.
Vehicle maintenance and tax showed the biggest rise of some 7.5 per cent over the last 12 months, followed by fuel (6.3 per cent) and office equipment (5.8 per cent).
Stephen Roper, professor of enterprise at Warwick Business School, says: ‘Economic recovery looks set to take longer than expected and small businesses are still facing a challenge in getting financial support from banks. Subsequently, they are being forced to push up prices for their customers in order to absorb rising costs.’
Mike Bowman, head of the insurance firm, says: ‘These figures do not make good reading for small business owners. They’ve already seen revised forecasts for slower economic growth than originally predicted and these cost increases will undoubtedly test cash reserves even further.’
Bowman adds that the price of fuel is an ongoing concern for SMEs, with many expecting it to continue rising.
Jon Haynes, a self-employed electrician from London, says this area is where he is being hit the hardest: ‘The recession has had a big impact on me. I think taxes in general should be reduced to help small businesses, with fuel the number one priority.’
The findings follow the government’s announcement of plans to raise VAT to 20 per cent from January next year.
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