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Winter of Discontent for SMEs?

Many small businesses are finding that their costs are rising faster than they can cope with, and faster than many large businesses are experiencing. 95% have seen an overall increase in their business costs over the course of the year, according to the Forum for Private Business, and this could lead to growing discontent within the SME sector as the winter gets under way.

Though annual inflation has dropped from around 5% to 3%, small business inflation is in fact running at around 6.7% – this means that prices are rising faster for micro, small and medium sized businesses than for the rest of the country. 85% have reported a rise in energy costs, 88% in transport costs, 82% in marketing costs and 73% in the cost of raw materials and stock. Around one in three businesses are unable to pass these costs unto their customers, meaning they are having to cut their own costs in order to keep prices static.

The major reasons for these increases can be traced back to VAT and energy price rises, as well as the weakness of sterling for importers. This looks unlikely to abate – oil and gas prices are rising, and there’s a 3p per litre increase in fuel on the horizon as well. 3 years ago we saw extreme cold weather hit firms with huge heating bills and a plunge in trade, so there are many fingers crossed hoping for warmer times this year.

Tight credit restrictions have meant that businesses often aren’t able to cope with these rising costs by accessing new finance. 41% feel they have less leeway to cope with rising costs when compared to last year, with 66% having cash flow problems as a result. 69% feel rising prices have impacted on their growth potential – four in five predict prices to continue rising into 2013.

Is your business suffering from rising prices and limited finance options? If this is the case, it could be worth looking into invoice finance – you can unlock funds tied up in unpaid invoices for a flexible cash injection into your business. If the small business climate is getting harsh, then invoice finance could provide you with a valuable lifeline.


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