Many SME owners experience increasing operation costs in Q4 2014

More than half (59 per cent) of all small business owners surveyed recorded an increase in operation costs in the final quarter of 2014.

That’s according to new data from the Close Brothers Business Barometer, which is a quarterly survey of UK SME owners and senior management from a host of business sectors on various economic and financial issues.

The report also revealed that 58 per cent of SMEs believe the increased operating costs will have a negative impact on their cash flow going forward into the New Year.

Almost two-fifths of SME owners impacted by increasing operating costs attribute rising energy costs as the most significant danger to their bottom lines, while just over a quarter reveal the cost of raw materials and stock is the most significant cause of pressure on their cash flow.

Mike Randall, CEO, Close Brothers Asset Finance, said: “Operating costs have increased significantly over the past few years, and are arguably one of the most difficult things for small business owners to manage in the current climate.

“We work with businesses across a range of sectors and we can see that they are all concerned about operating costs, which is unsurprising given the energy requirements, raw materials and machinery that many require.”

Customers are unlikely to be affected too heavily, with more than a third of SMEs surveyed indicating that while their direct costs have increased, they don’t feel able to pass on these charges to customers with increased pricing.

“This is a situation that is leading to increased pressure on already-tight margins and it is entirely possible that operational costs will continue to rise for the foreseeable future,” added Randall.

“Our advice is that if you haven’t thought about your business finances for a while, then this is a good time to ensure your funding is structured to cope with this strain on cash flow.”

Date published 12 Jan 2015 | Last updated 12 Jan 2015