Rising overheads are a key factor behind a slump in Scottish business confidence, according to new research from the Federation of Small Businesses (FSB).
Around three quarters (77%) of Scottish businesses say the cost of running their business has increased since this time last year, compared to only one in twenty (5%) that have seen a decrease.
Fraser MacLean, managing director of distribution firm M&H Carriers, believes the impact of these costs will eventually be felt by the customers.
He said: “The costs that have impacted us most is energy costs, fuel costs and staff costs.
“Whilst you can absorb some cost increases in your business you have to pass some of the costs onto customers so effectively everyone ends up having to pay a little bit more because these costs, particularly fuel and energy are outwith your control.
“It’s hard for us, particularly as a transport company as you are not talking about a one or two per cent increase in prices. It’s huge.
“It’s a massive percentage increase in the base cost of fuel.”
Customers going to feel impact
The firm delivers parcels, freight, pallets and other products across the country. It works with small businesses, commercial multi-carrier networks and private individuals.
FSB’s Scottish Small Business Confidence Index fell steeply to +1.2 points in the third quarter of 2021, from +20.5 points in the second quarter.
The equivalent UK-wide figure fell to +16.4 points from +18.4 points over the same period, a reversal to the situation seen over the summer.
Mr MacLean said: “People need to understand that services are going to start costing more as a result.
“I don’t know how the government can impact the price of fuel and in terms of energy there’s a lot of firms going bust aswell.
“There needs to be wholesale changes in that sector to reflect a more sustainable model going forward.
“The customers don’t want to pay more but the reality is they are going to have to. Nobody wants to pay more for services but if it’s costing more you are going to have to.”
Rising costs holding back businesses
FSB says rising overheads are making it difficult for businesses to invest in measures to grow their operations, tackle their environmental impact and holding back efforts to recover from the Covid crisis in a sustainable way.
Andrew McRae, FSB’s Scotland policy chair, said: “Scottish business optimism bounced back over the summer but has slumped in the autumn.
“That’s partly because the easing of Covid restrictions delivered a big confidence boost that’s waned over time.
“However, punishing rises in business overheads are also taking their toll on the trading outlook. And with a rise in payroll taxes on the way, there’s no end in sight.
“Spiralling overheads are one of the biggest headaches for our members. Smaller businesses neither have the statutory protections of consumers, nor the bargaining power of the biggest firms.
“That’s why FSB has been campaigning for the UK Government to take action to help these operators, at the very least easing the VAT burden on their gas and electricity bills.”
New scheme for energy efficiency to help businesses
In a separate report launched this week, FSB is calling on policymakers to launch a new voucher initiative to help small businesses reduce their environmental impact.
Dubbed ‘Help to Green’ the scheme would see businesses given grants of up to £5,000 to become more energy efficient.
Mr McRae said: “In the short term, we need to help firms manage the overnight spike they’ve seen in their bills.
“Next, we need to support local and independent firms to reduce the amount of energy they use.
“While smaller businesses know they have to take action, only a third of them have a plan in place to reduce emissions.
“Therefore governments in Edinburgh and London need to put together a package of help and support that helps firms move in the right direction.”