Small businesses are being forced to swallow increased costs of doing business to avoid passing them onto customers and losing ground to competitors in a tough market.
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With energy, transport and raw material costs all climbing and credit continuing to be a problem for small firms many have had to take the difficult step of eroding their own margins to avoid passing increased prices onto customers.
The Forum of Private Business (FPB) has given the government some applause for trying to make life easier for small firms but states that many are struggling to carry on and rising costs continue to be a major concern.
A third of the FPB membership revealed that it is not in a position to pass the increased costs onto customers so are cutting their own to keep things static.
But large numbers of small firms are having to raise prices and pass those on to customers with no end in sight to the current problems.
“The major reasons for increases in prices are predominantly down to VAT and energy prices rising, coupled with the weakness of sterling for importers," said Alex Jackman, the Forum’s senior policy adviser.
“Unfortunately, it doesn’t look as if there is going to be any respite from energy hikes any time soon. Oil prices have started rising again having dipped in the summer, and now we have the likes of British Gas raising prices for customers too. On the horizon we have a 3p a litre increase in fuel duty scheduled for January," he added.