Business braced for soaring costs of up to £6.8bn

SME costs could go up by £6.8bn this year as bosses struggle to cope with rising overheads and deteriorating revenues, a report claims.
SMESME
SME

The gloomy picture is being brought about in the main by a forecasted rise in inflation of 2.7 per cent for the year ahead.

Some 14 per cent of businesses expect their revenues to shrink this year, and 57 per cent expect them to stay the same.

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The findings are from a new report from leading commercial insurer RSA, titled Economic Imperative, which shows that 2017 is likely to be a tough year for businesses, with stagnant revenues meaning that an expected increase in costs is likely to eat into their profit margins, hindering their growth.

The impact on the UK economy could be significant, given that the businesses that expect their revenues to shrink have a collective turnover of approximately £252bn.

Revenues are likely to take a hit due to an expected slowdown in consumer spending, while increasing costs are likely to be driven by the rising price of imported goods, an increase in business rates, auto-enrolment and the apprenticeship levy.

Additionally, around 2.1m of the UK’s 5.4m SMEs see rising business costs as a top three risk to their business.

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The findings come at a time when more than half of SMEs think that the government is not doing enough to help them grow and the expected deterioration of business conditions is likely to be exacerbated by the increase in business rates in April. The average shop will see business rates rise by 8.4 per cent while those in central London could see increases of as much as 100 per cent

Russell White, Schemes and Deals Director, Commercial Risk Solutions at RSA, said: “The business environment is expected to become much harsher in the coming year, and it’s crucial that businesses plan ahead to ensure that they are prepared. The Government also has a role to play by considering ways through which it can mitigate the negative effects that increasing business costs could have on the economy.

“One solution could be increasing the small business rate relief threshold so that it includes properties with a rateable value below £20,000 rather than £12,000. Employing such a strategy could result in the Government generating more money than it would have done in the long run by boosting business growth.”

The news comes on the day a £9.7m support initiative for Yorkshire SMEs goes live, with a view to helping smaller firms across the region take their trading to the next level.

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The national Manufacturing Growth Programme (MGP), which is funded by ERDF and delivered by Economic Growth Solutions (EGS), is promising to fill the void left by the axed Manufacturing Advisory Service by providing access to specialist assistance to help firms grow and improve.

A 19-strong network of experienced Manufacturing Growth Managers, access to industry specialists and the opportunity to apply for grants of up to £3,500 are all part of the package.

Support can be used for leadership and management training, R&D, lean manufacturing, productivity and capacity, quality systems and supply chain development and is open to the majority of SME manufacturers in the region.

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