Shaping Partner FSB explains how rising costs are affecting small businesses across the Solent area

Rising costs are having a huge impact on small businesses across the Solent and South Coast.

On top of rising energy costs and surging prices, businesses are now facing the end of business support measures, mounting inflationary pressure and rising taxes next month.

Analysis by Shaping Patron, FSB shows that April’s scheduled hike in employer NICs in April will cost SMEs in the South Central region around £390m. On average the planned 1.25 percentage point increase will add more than £3,000 to the annual tax bill of the average SME employer.

FSB Development Manager in Hampshire, Dorset and Isle of Wight, Nicky Kildunne said: “Our economic recovery is still fragile. Firms now find themselves bracing for an April flashpoint when a jobs tax hike is set to take effect alongside a grab on dividend income, fresh business rates bills, a rise in the living wage and the end of Covid support measures such as a lower rate of VAT for hospitality. Added to that an average rise across the board to general operating costs of around 14%, life continues to be very challenging for small businesses.”

Nicky added: “While scrapping the increase in NICs would be a huge relief, increasing the Employment Allowance by a quarter, to £5,000, would go some way to offset the worst of the pain for small employers. Before then we’ll have the Chancellor’s Spring Statement. Our recovery will hinge on it being a pro-business one.”

The FSB (Federation of Small Businesses) – Britain’s biggest business representation group – invites its members to share their confidence levels on a quarterly basis and in the run up to Christmas they revealed a fall of nearly 30 per cent since the previous report in the autumn. As well as confidence levels falling, the report also revealed fears over future profit levels and concern over the current economic conditions in the UK for trading. Businesses polled also reported that getting appropriately skilled staff and reduced customer demand were also among the biggest barriers to growth.

To illustrate the challenges that Solent small businesses are facing, FSB members in the area have set out how they are impacted by rising costs.

As well as seeing their utility bill double, a local cleaning company has seen costs rise significantly on collection deliveries and employee mileage due to the sharp increase in fuel costs. The business owner said “I think we will lose customers if we increase prices to cover these costs” a fear that is echoed by many business owners, including this garage owner.

The Solent based garage has seen almost every operating cost increase, from the costs of parts & products rising between 6 and 20%, to increased environmental disposal of waste costs and a 45% surge in insurance renewal cost. It doesn’t end there… business rent has increased by 2% and electricity costs have increased by 31% per unit. The garage owner told us “The cost of employing skilled labour has gone bonkers which makes it difficult to judge salaries, get it wrong and often you only find out when you get a letter of resignation”. He continues, “What does that mean to my business? I am looking at having to increase our labour rates, but I am concerned that this will stop us getting new work in when we complete estimates for repairs and servicing. It will also make it harder to up-sell work that`s required. We have had to purchase new equipment to keep up with newer model cars and also invest in more training, which results in a drop of income short term. It’s difficult to look long term and every day something changes”.

The vast increases to energy costs are having a huge impact on businesses. A New Forest based member in the retail sector told us “Until November we were pottering along with Ampower until they went under. We’d been on a tariff of .13p per kWh with a pretty average monthly DDR of £200 for our showroom” Following a turbulent few months of going backwards and forwards between energy companies, this retailer has ended up with an outstanding balance of £1,600. And a charge of .80p per KWH – a massive 75% plus increase.

The pre Christmas months were particularly tricky for the retail sector and most businesses were focussed on surviving post Christmas. During this time, many small businesses had to start repaying their Business Bounce back Loans.

Business owners are taking action to gain control over their energy costs, like this Hampshire based dog food producer. “We make raw dog food, and we currently have two large walk-in freezers, and are about to add a third in our new additional unit. Our original unit had an electricity contract at 16.25p/kWh, and the renewal (from April) was quoted at 45p/kWh. Actual cost per month was c. £300, this would have been nearly £1K a month after the increase. We have now found a four-year fixed contract for two of our units including this one at “just” 33p/kWh, but we are actively planning to move to a new purpose built unit which will have lots of solar panels on the roof.”.

Nicky Kildunne concluded: “There is a lot of support available to businesses in the Solent area, and various schemes which assist businesses to become more sustainable”. If your business is struggling to work through the current rise in costs, please do reach out to your business support networks.”