• 55% of small businesses fear for their survival if costs continue to escalate



• 23% rise in small business overheads since 2005, according to Cebr



• Cost inflation limiting the growth of three quarters (74%) of small firms



Small firms are trapped in a vice of rising business costs, which is squeezing margins, choking growth and threatening their survival, according to a major new study by Make It Cheaper and the Centre for Economic and Business Research (Cebr).



The research shows that overheads have risen by almost a quarter over the past five years, and more than half of small business owners now warn that their company will simply not survive much longer if costs continue to rise at current rates.



Jonathan Elliott, Managing Director of Make It Cheaper, comments: “Rapid cost increases are placing the survival of small companies in jeopardy, and dampening the entrepreneurial spirit so crucial to economic recovery.”




All rise: Make It Cheaper and Cebr map business cost inflation


The vast majority of small business owners identify rising costs as the most significant threat to their company this year and warn that the country has become an ‘unbearably expensive’ place to do business.



According to the Make It Cheaper research, businesses report an overall average rise in business costs of 4.5% year-on-year to July 2011.



In terms of individual overheads, the biggest risers predicted by the Index are transport costs, which are expected to rise 20.5%, energy bills, forecast to grow 8.5% and insurance premiums, set to rise 7.1% in 2011.




Spiraling overheads hit SME growth and margins, forcing closures


Rising costs over the past five years have damaged the growth of three quarters of small UK firms, and will limit the growth of 78% this year, according to the Make It Cheaper research.



More than two thirds of firms have seen their profit margins hit by increasing costs over the past 3 years, to the tune of 22% on average, whilst approaching half  have been forced to increase prices and nearly a quarter have cut staff.



Worryingly, three fifths of small business owners claim that the high cost of doing business in the UK is acting as a disincentive for growth, whilst 86% believe it is damaging economic recovery.



Jonathan Elliott comments: “Government policy needs to curb business cost inflation this year. However not all threats identified by entrepreneurs are outside of their control.


“By shopping around, comparing prices, regularly switching suppliers and taking care not to get caught in contract renewal traps, companies can go a long way to bringing their overheads, such as energy, under control.”



For further information, and advice and tools for small businesses to help manage overheads from Make It Cheaper, go to www.makeitcheaper.com/businessfit.