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Inflation Jump Adds to Pressures on SMEs

Written by: Keith Tully

Reviewed: Tuesday 13th June, 2017

A jump in the rate of inflation across the UK is adding to the pressures being faced by small and medium-sized enterprises (SMEs) around the country.

Official figures from the Office for National Statistics (ONS) show that inflation is climbing and steadily squeezing household finances, which in turn inevitably makes life notably more difficult for SMEs across a wide range of industries.

According to the ONS, the headline rate of inflation in the UK increased from 2.7 per cent to 2.9 per cent between April and May of this year, which puts the figure close to a four-year high.

Falls in the value of the pound on international exchange markets is understood to be a key driving force behind the rises in inflationary pressures.

Economists had anticipated seeing the headline rate of inflation remain at 2.7 per cent in May.

Expectations are now that a relatively high rate of inflation will continue to force consumers throughout the UK to reign in their spending on a monthly basis and add to the costs faced by a huge number of companies.

“Operating costs for small firms are now at their highest in four years,” said Mike Cherry from the Federation of Small Businesses in a statement.

“Small business owners and their staff are having to personally absorb these hikes and have less and less room to invest for growth. Support is urgently needed.”

Mr Cherry went on to note that a lot of small businesses around the UK are already grappling with the impact of increased business rates, which went up for many thousands of SMEs after a recent restructuring of the commercial ratings regime.

A fund of £300 million was promised by the government to support small businesses which were badly affected by business rate rises but that funding has yet to be allocated to intended recipients.

“We’re yet to see that funding materialise, while many local authorities have chased down small businesses to pay incorrect, over-inflated bills,” Mr Cherry said.

“The [new government’s] communities secretary needs to get a grip and ensure this proposed support reaches those who need it most in his first days reappointed to the job.”

There are concerns among economists that inflation will rise further nationwide before falling back if current trends are to continue.

Keith Tully

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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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