SMEs face rising business costs

26 October 2012 •

The majority of small businesses in the UK (95 per cent) have seen a rise in business costs over the past year, according to research from the Forum of Private Business (FPB).

According to its latest quarterly referendum survey, transport costs were the most commonly cited increase (88 per cent), followed by energy costs (85 per cent), marketing costs (82 per cent) and the cost of raw materials and stock (73 per cent).

Despite this month's fall in inflation to lowest level in nearly three years, the FPB said that many businesses were 'still facing an uphill battle to make ends meet.'

A rise in VAT and energy prices, combined with the weakness of sterling for importers, was blamed for the overall increase.

The Forum's senior policy adviser Alex Jackman warned that respite from energy price hikes in the near future was unlikely, with oil prices, utility bills and fuel prices all predicted to rise.

"It could be that we are shaping up for another winter of discontent, particularly if the mercury plunges this winter and firms are hit with huge heating bills and a fall in trade like we saw three years ago," he said.

"Many firms are already battling the economic elements, but if the weather turns it could spell the end for those already walking a cost tightrope."

Although CPI inflation has now dropped to 2.2 per cent, research suggests that small business inflation sits at 6.7 per cent, rising fastest for micro businesses and SMEs than the rest of the UK society. The figure has however improved slightly from the 8.3 per cent reported by the Forum last year.

Worryingly, one in three businesses also admitted they were absorbing rising costs or cutting their own costs in order keep customer prices static.

Businesses said that late payment from customers and competition from other businesses offering products below cost price were exacerbating the tight conditions.

The FPB is now calling for the Government to consider freezing business rate rises due in April next year.

Entrepreneur scheme extended to boost enterprise

18 October 2012 •

The New Enterprise Allowance (NEA) scheme has been extended to give 33,000 extra jobseekers help to set up their own business.

Initially launched in 2010, the NEA is available to Jobseekers Allowance (JSA) claimants aged 18 and over. A weekly allowance worth £1,274 over 26 weeks at £65 a week is paid to successful applicants to help them set up an enterprise.

Claimants can also access a loan of up to £1,000 to help with start-up costs as well as expert coaching from a business mentor. Since launch, the scheme has helped to set up 8,180 businesses, and it expects 40,000 to be created by the time the scheme closes to new referrals in December 2013.

Commenting on the extension, Prime Minister David Cameron said: "If Britain is to compete on a global stage, we must do all we can to support budding entrepreneurs and build a nation where everyone aspires to great things.

"I am determined to get behind people who have ideas that will work and a can-do attitude that will turn those ideas into successful enterprises.

"It doesn't matter what your background is or whether you are out of work, if you are prepared to work hard and aspire to achieve more, this Government, through schemes like the Enterprise Allowance, will back you."

The scheme used to require that applicants had been claiming JSA for at least 26 weeks before accessing the finance and support, but it has now been amended to allow access from day one of JSA.

Two in five Brits do not know where their pension is invested - do you?

26 September 2012 •

More than two in five adults (41 per cent) do not know where their pension fund is invested, according to research from Baring Asset Management.

It said the large number - equivalent to eight million people in the UK - highlights a passive attitude towards saving for retirement and warned that people should adopt a more active approach through regular pension planning.

The survey also found that the number of adults who have never reviewed their pension plans is worryingly high - around 45 per cent or 16 million non-retired Brits.

"In spite of the on-going global financial crisis people are refusing to consider the impact it may be having on their long term savings," it said in a press release.

Personal or company pensions are most commonly paid via monthly or lump sum contributions to a pension provider, who will then invest it on the individual's behalf into a selection of investment funds; usually in fixed-interest bonds, property and shares.

However, it seems many are unaware that the choice of where to invest a pension fund often lies with the individual and will largely depend on their attitude towards risk and their investment objectives.

The same survey conducted in 2008, prior to the financial crisis, revealed that attitudes towards financial planning in 2012 have not improved, and in some cases worsened.

Elsewhere, a further 12 per cent could not remember when they last reviewed their pension, while under half had failed to review their pension plans in the last 12 months.

Marino Valensise, chief investment officer at Barings said that people were not taking the necessary action to ensure their pension provides what they will require in retirement.

"It is concerning to think that despite the very high profile global financial crisis that we are experiencing not more people have considered and acted upon the need to address how it may be affecting their funding in retirement."

"A large proportion is happy to accept the default setting which may not necessarily offer the best fit in terms of risk and reward. People who fail to take an interest in understanding the type of pension they have or indeed where it is invested are burying their heads in the sand."

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