The rising cost of running a small business
Some of the key changes that could hit small business in the pocket and how we can help
Small businesses could be set to hit trying times in the wake of increasing uncertainty in the UK.
Over the past year, several legislative, economic and political changes have meant that the outlook has become unstable and to some extent is affecting businesses negatively.
What are the some of the key issues affecting businesses?
The general consensus is that businesses are losing faith in government support. According to financial services group Smith & Williamson, 65% of business leaders believe they lack government support and over the past year, there have been a number of legislative and policy changes that have hit businesses in the pocket.
Business rate changes
Last year, the government announced that it would be undertaking the first revaluation of business rates in seven years.
For some, the revaluation is positive as it means a decrease in business rates. But, for businesses such as retailers in places like central London, rates are increasing by as much as 80%. This is a real threat to their profits, as analysts have predicted a huge fall of 25%.
Small firms, with tighter profit margins will certainly feel the effect of any rate increase more heavily. To support those businesses, a transitional relief scheme to be phased in the changes over a period of five years was announced, but recently revealed changes to this meant that at the lower end, bills could still jump by up to 45%.
Reduction in VAT threshold to hit more than half a million SMEs
It’s reported that up to 600,000 small businesses could be hit as the result of plans for a VAT hike. At present, businesses with a turnover of less than £85,000 don’t have to charge VAT on the services and goods they trade. Under plans, the tax-free threshold, is to be reduced to £43,000, meaning that hundreds of thousands of businesses will face a new operating cost.
This prospective change comes as part of a proposed wider overhaul of the VAT system, which would mean less bureaucracy, form-filling and penalties for non-compliance.
Chairman of the Federation of Small Businesses, Mike Cherry said of the announcement:
“Any reduction of the VAT threshold against the current backdrop of unprecedented uncertainty and spiralling costs will have a hugely negative impact on growth within the small business community.”
Interest rates rise by 0.25%
The recent increase in interest rates, from 0.25% to 0.5% is the first in a decade. It’s predicted that some 448,000 firms are in varying degrees of financial distress, having felt secured by low interest rates.
The increase will drive up the cost of borrowing and the cost of existing debt could also go up – pushing these distressed companies closer to insolvency.
Rising minimum wage, higher fuel and transportation costs and a rise in import expenses thanks to the weakened pound are other factors putting pressure on British businesses this year.
With these costs on the up, many of them outside of your control, keeping what you can control in check is more important than ever.
Three ways Make It Cheaper can help
Do It For You For many business owners, finding the time to ensure you’re on the most competitive rates possible can be an impossible task. That’s why we created Do It For You.
With this service, you’ll save time, effort and hassle by leaving your contract renewals to us – for good. We’ll give you that precious time back and remove the worry around overpaying on energy bills.
Rolling onto standard rates after your contract ends can amount to a third more spent on keeping your property fuelled but as part of the Do It For You service, we secure our best rates for you ahead of your renewal date and ensure that you’re on them once your renewal is up, removing the hassle of having to do this yourself.
Learn more about Do It For You and how it can help you secure your businesses’ costs for good.
One of our partners Handle is an online platform designed specifically for small businesses, to help them assess and manage key elements of their operations. Handle aims to shine a spotlight on data that third parties (customers, lenders, affiliates) use to make decisions about a business.
Many just don’t have ready access to this kind of insight and it can help businesses to make key improvements (SEO, financial profile, online reputation) which can in turn, increase profitability.
Find out more about how Handle could help your business.
Accessing affordable finance can be difficult as a small business, as well as time consuming. It can however, be an important way to help your business. We can connect you with a range to do all the legwork involved in searching for and comparing the most competitive borrowing, so you don’t have to.
See more about our business finance offering.