Rising costs causing concern for small firms

Rising costs are causing serous concern among the UK's small businesses, according to research by the Centre for Economic and Business Research (CEBR).

The group's figures show that in the last five years there has been a 23 per cent increase in small business overheads.

This means company costs have risen at a higher rate than inflation, with the Consumer Price Index increasing just 19.4 per cent in this time.

In the past year alone, the small business community have reported an average rise in business costs of 4.5 per cent.

The CEBR research shows that 55 per cent of small firms fear for their survival if costs continue to escalate.

Transport represents the biggest concern, with prices in this area predicted to increase by 20.5 per cent this year.

This is followed by energy bills, which are expected to rise by 8.5 per cent, and insurance premiums, which look set to grow by 7.1 per cent.

In total, three quarters of UK small firms said rising costs in the last five years have damaged their growth prospects.

More than two thirds have suffered a hit to their profit margins in the last three years and almost a quarter have been forced to cut staff.

If costs continue to rise in the months ahead, many could be left with no option but to seek insolvency advice and look to restructure their business.

"Government policy needs to curb business cost inflation this year," said Jonathan Elliot, managing director of business price comparison site Make It Cheaper, which collaborated with the CEBR on the research.

"Rapid cost increases are placing the survival of small companies in jeopardy, and dampening the entrepreneurial spirit so crucial to economic recovery," he remarked.