East’s small firms facing crisis point as costs soar, FSB warns
- Credit: Su Anderson
East Anglia’s small companies are facing a spiralling costs crisis, business leaders have warned.
Latest Office for National Statistics (ONS) figures show input price inflation for businesses reached its highest level on record at 19.2% in March 2022 compared to 15.1% in February 2022.
Meanwhile the Consumer Prices Index (CPI) – a measure of household inflation – has hit 7% in the year to March, up from 6.2% in February. It was the highest since March 1992, when inflation stood at 7.1%.
Candy Richards, Federation of Small Businesses (FSB) development manager for the region, said while households were struggling, small firms were facing a “cost of doing business crisis” as inflation hits new heights.
“Small businesses across our region are facing record business costs, which comes at a time of cripplingly low consumer confidence,” she said.
“Inflation is at its highest point on record and this is pushing up the price of running a small business to, often, unsustainable levels. Electricity, energy, and fuel costs are increasing by thousands of pounds a year for many small businesses, particularly impacting on those in rural areas who are dependent on oil to heat their business and have limited access to public transport.
“Speaking to local businesses, we know that inflation is hiking up the price of products, goods, and materials across the board. And this comes on top of emergency debt repayments kicking in, tax increases, the end to Covid support measures, and an increase in VAT which is hitting hospitality hard.”
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And as individuals felt the pinch as prices soar, small business owners were “very mindful” that their customers have less to spend and were absorbing the rises, she said.
“Many are choosing to not increase their prices and are taking a big hit to their take home pay and profits, or they are pausing their plans to grow and create new jobs. One local business recently shared that their energy costs alone are increasing by £22,000 a year. Quite simply, this is a new job opportunity they can no longer create.
“Small businesses can only absorb these cost increases for so long and, inevitably, we will see further price rises being passed on to customers. As small businesses continue to face such significant challenges, the government must step up its support.”
While she recognised the government’s limitations in tackling international supply chain disruption and its impact on raw material and fuel costs, there was more it could do in supporting firms facing energy cost rises, she argued.
“At one end of the energy market you have big corporates using their clout to get the best deals and, at the other, households which are, rightly, receiving support. But in the middle, you have small firms which are being well and truly left out in the cold.”
The FSB is urging the Government to introduce a scheme through the business rates system to provide financial support to small businesses – similar to the support received by households through the council tax system.
“Locally, I would also encourage all firms to check what support is out there, from both the New Anglia Growth Hub and their local authority,” said Ms Richards.