Small companies across the UK are being impacted by soaring input costs and the issue is a growing cause for concern.
That’s according to the Federation of Small Businesses (FSB), which has said that two-thirds of small firms nationwide have seen their operating costs rise over the course of the past year.
Retail prices increased by 3.9 per cent in July but the headline rate of input prices jumped by as much as 9.9 per cent in the same period, which is understood to be having a significant impact on the finances of many SMEs.
“Unless urgently addressed, inflationary pressure will stifle recovery among the small firms that make up 99 per cent of our business community,” said the FSB’s national chairman Mike Cherry in a statement.
“While consumer costs have cooled, it’s a different story for inputs, with producer prices continuing their upward march this month,” he added.
Mr Cherry went on to point out that many SMEs are already under serious financial pressures owing to debts taken on during the Covid crisis, as well their rent arrears and business rates.
“The government should move swiftly to mitigate the effects of soaring costs,” he said.
“Bringing down Employer National Insurance Contributions - which serve as a jobs tax in an environment where many are struggling to recruit - would be a good starting point,” he added.
An easing of Covid-related restrictions recently has had a positive impact on the economy as a whole and on the prospects for many thousands of small firms but there are clearly major challenges still to overcome for many businesses.
Indeed, the latest figures published by the corporate insolvency experts of Begbies Traynor estimated that there were some 650,000 companies in the UK that can accurately be described as being in “serious financial distress”.
Part of the picture is that loans taken on via government-backed lending schemes last year now need to be repaid and many companies are effectively unable to start paying down those debts.
It is also understood that some creditors, particularly landlords, are beginning to become more aggressive in how they pursue debts they’re owed by small businesses.