“Cost of living crisis starts with cost of doing business crisis”, say small firms, as input prices rise at record rate

Press Releases 13 Apr 2022

FSB comments on record high input price inflation, setting out the impact on small businesses and what they need from Government

Responding to ONS updates showing that input price inflation for businesses has surpassed 19% to its highest point on record and the consumer prices index has hit 7%, Federation of Small Businesses (FSB) National Chair Martin McTague, said:

“It’s been decades since we’ve seen input costs surging at this kind of unmanageable rate.

“The discrepancy between the rise in costs for firms and consumer prices shown in these latest updates gives you some sense of how small business owners are taking the hit directly – in a lot of cases, reducing their take home pay or scaling back investment and expansion rather than passing on higher costs to customers.

“But a lot of small businesses are left with no choice but to up prices as their overheads spiral: the cost of living crisis starts with a cost of doing business crisis.

“Earlier in the week, we saw how runaway business outgoings are now weighing on economic growth.  

“Surging input price inflation for firms comes on top of rapidly rising energy costs, emergency debt repayments kicking in, tax increases and the end to Covid support measures, not least targeted VAT relief.

“There’s only so much the Government can do about international supply chain disruption and its impact on raw material and fuel costs. It can, however, do more to support small firms at the local level with energy costs.

“Micro business owners operate like consumers in the energy market but are not receiving comparable support via the business rates system to that received by households through the council tax system. That mismatch should be addressed.

“At one end of the energy market you have big corporates using their clout to get the best deals and, at the other, households which are receiving support. In the middle, you have small firms, which are being well and truly left out in the cold.

“The Chancellor rightly embraced our recommendation to up Employer NICs relief for the smallest firms to £5,000 via the Employment Allowance at the Spring Statement, giving them some much needed breathing space.  

“We’re now urging policymakers to go further in addressing a late payment crisis that has been exacerbated by the pandemic. Making audit committees directly responsible for supply chain practice would make a massive difference in this space, at no additional cost to the Treasury.

“We’re encouraging all firms to check what support is out there, including at the local level where some Covid support grants remain unspent.”

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About FSB

As the UK’s largest business support group, FSB is the voice of the UK’s small businesses and the self-employed. Established over 40 years ago to help its members succeed in business, FSB is a non-profit making and non-party political organisation that’s led by its members, for its members. As the UK’s leading business campaigner, FSB is focused on delivering change which supports smaller businesses to grow and succeed.

FSB offers members a wide range of vital business services, including access to finance, business banking, legal advice and support along with a powerful voice in Government. Each year FSB also runs the UK’s Celebrating Small Business Awards. More information is available at www.fsb.org.uk. You can follow us on twitter @fsb_policy and on Instagram @fsb_uk.