Business costs up 12% due to Government policies

New research reveals that recent Government policies have increased cost pressures on UK small firms.

The Impact of Government Policy Index, published by the Federation of Small Businesses (FSB), is based on research by the Centre for Economics and Business Research (Cebr).

The findings show that the increase in small business costs directly resulting from Government policy decisions has significantly outpaced inflation in recent years.

According to the FSB, a "wide range of Government taxes, reliefs and employer obligations" have caused outgoings for smaller firms to rise by an average of 12.5% in the five years to 2016. That compares to a cumulative Consumer Prices Index (CPI) figure of 7.7% over the same period.

Medium-sized businesses have seen the highest increases, followed by micro-businesses and small firms.

Mike Cherry, FSB national chairman, said: "This new independent research sets out just how the costs of many historic and individual policy decisions have mounted up, heaping large and sustained pressures on small firms at a rate that's significantly outstripped CPI.

"Given that small firms employ 60% of private sector workers and are the engine room of our economy, all policy-makers should take heed of this cumulative burden when it comes to future policy interventions."

As the Budget approaches, Cherry says "entrepreneurs will be looking to the chancellor for measures to help bring down the spiralling costs of doing business".

The construction sector has been hardest hit by Government interventions according to the report, with costs rising 34% as a result of policy decisions. Construction firms have been heavily impacted by the introduction of pension auto-enrolment, increases to minimum wage rates and rising employer National Insurance Contributions. Corporation tax liabilities for construction businesses have also steadily risen.

"Small construction firms are being disproportionately squeezed by Government-imposed costs," said Cherry. "If this administration is serious about tackling the housing crisis, that has to change.

"Our members are contending with a huge number of taxes, duties and employer obligations. More needs to be done to encourage small businesses to grow."

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