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The worrying consequences of spiralling business costs

December 17, 2013 by Guest contributor

The worrying consequences of spiralling business costs/man showing empty pockets{{}}According to research published recently by membership organisation the Forum of Private Business (FPB), business costs in 2013 in the UK have increased at a rate of “3.5% ahead of inflation”.

The FPB’s latest Cost of Doing Business survey, based on responses from its members, concluded that “firms are still facing an uphill battle to make ends meet, despite positive signs of an economic recovery,” says the organisation.

The FPB reckons 94% of businesses have seen an overall increase in their business costs in 2013, with 87% having to cope with an increase in energy costs, 83% with higher transport costs, 78% with a rise in marketing costs and 69% with higher raw materials/stock costs.

Margins continue to be squeezed, with two-fifths (41%) of respondents unable to “pass any rising costs onto customers, forcing them to cut their own costs to keep prices static” (just 2% were able to pass on costs in full, says the FPB).

"The major reasons for increases in prices are predominantly down to transport and energy prices rising, coupled with the continued weakness of sterling for importers,” explains Alexander Jackman, FPB head of policy. “The economic outlook may be better, but costs still remain an issue for our members and a key focus of our lobbying and support services.

"Unfortunately, it doesn't look as if there is going to be any respite from energy hikes any time soon, despite the ongoing political pressure to introduce more competition in the market, with many of the major players recently announcing significant increases and others expected to follow suit."

Although annual inflation has fallen from 3% to 2.7%, prices have continued to rise faster for businesses (6%), although, says the FPB, this is less than the 6.7% it reported last year.

Almost three-quarters (73%) of respondents have experienced cashflow issues as a result of rising business costs, which has had a “detrimental effect on 51% of firms when looking to invest”, while “51% also reported that it has been detrimental to employment levels” and “63% feel that it has inhibited their plans for growth”.

Despite the recent good news on the UK economy, increasing business costs could hamper many business’s ability to take advantage of recovery, with 83% of respondents expecting prices to continue to increase and 16% expecting a “significant increase”, says the FPB.

"Businesses, like consumers, are facing a lot of upward cost pressures at the moment,” notes Phil Orford, FPB CEO. “When looking at how to dampen energy price rises and other cost pressures for households, the government shouldn't ignore the fact that businesses are facing similar challenges. Political efforts to positively impact on the cost of living should not be funded through increasing the costs of doing business."

Sites such as uSwitch, UKPower and comparethemarket.com enable businesses and individuals to compare energy prices and try to find a better deal.

Further reading

How to reduce your energy bills

September 07, 2012 by James Newhouse

How to reduce your energy bills/Power supply meter{{}}If you’ve started a small business recently, you’ll know how hard you have to work to succeed, especially in these times. Luckily, there are ways to save money on running your business, money that can either be reinvested or spent in your local community to help grow the economy. Saving money on your business energy bills is a great way to start.

So, perhaps you’ve just moved into new premises and inherited out-of-contract rates or ‘deemed rates’ from the previous contracted tenants. Getting your quotes in quick and signing for a proper tariff could see you save as more than 65% on your bills instantly. Setting up a direct debit to pay your supplier straight away can also bring a saving of about 3% on average, but you need to make sure you have the money in the account on the DD day.

Once you’ve got your new contract in place, check the expiry date and make a note of it in your diary… Now flick back a few pages so you’re at about eight weeks before the expiration date... Now flick back a few more pages and write in big letters “NOTIFY ENERGY SUPPLIER IN WRITING OF TERMINATION OF CONTRACT”.

On this day, you need to write a letter informing your supplier that you are terminating the contract. Why? Because contracts have an automatic renewal clause, and once this kicks in, you’ll find that you’re the victim of price increase – sometimes up to 40%!

Yes – FORTY PERCENT!

A letter of termination is straightforward to write. It doesn’t have to be fancy, just a simple letter stating from the expiry date you will not be renewing your current contract. Pop this in the post and use the ‘signed-for’ service, so you have a record of when it’s received. Once you know your contract is no longer going to be renewed, you can gather quotes, but remember that business energy quotes are only legitimate for the day upon which it’s been quoted, after that, they cease to be valid.

You should find that your supplier and other suppliers will be just itching to give you the lowest rates they can for the next contract period. Coincide this with seasons of low energy usage (eg the summer months) and you can secure a nice low rate for the next 12 months.

Forget mainstream price comparison sites and consider chatting to a UIA energy broker. They’re specialists in business energy suppliers and how to get the best deals. Many offer free advice and consultation, so you’ve got nothing to lose by giving them a call. Energy brokers will actively negotiate with suppliers to lower your energy rates, so you’re not being quoted from an automated system.

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