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Indies fear rising costs will thwart survival

Indies have warned they may be unable to survive if costs continue to soar, with rising prices impeding growth and damaging economic recovery.

According to a new study by business utilities specialist Make it Cheaper and the Centre for Economic and Business Research (Cebr) 60% of independent retailers worry that if costs continue to rise their survival could be at risk.

Since 2005 there has been a 23% rise in small business overheads and over three quarters (81%) of indies have said cost inflation has limited the growth of their shop.

Rising costs are the most significant threat to many indie businesses, with 79% of the 750 indies surveyed agreeing with this, 85% of indies say the country has become an “unbearably expensive” place to do business. Among small business owners in the study (59%) claim that the high cost of doing business is a disincentive for growth and 86% believe it is damaging economic recovery.

Almost three quarters (73%) of indies have seen their profit margins suffer from increasing costs over the past three years. To cope with soaring costs 59% of shops have been forced to increase prices and 27% have had to cut staff.

Jonathan Elliott, managing director of Make It Cheaper, said: “Rapid cost increases are placing the survival of small companies in jeopardy, and dampening the entrepreneurial spirit so crucial to economic recovery.”

Make it Cheaper and Cebr have developed an inflation tracker for small business overheads which has shown a 22.8% rise in small business costs over the past five years. Businesses have reported a rise in business costs of 4.5% year-on-year to July 11. Transport costs, energy bills and insurance premiums are expected to be the biggest risers increasing by 20.5%, 8.5% and 7.1% respectively in 2011.

Elliott said: “Government policy needs to curb business cost inflation this year. However not all threats identified by entrepreneurs are outside of their control.

“By shopping around, comparing prices, regularly switching suppliers and taking care not to get caught in contract renewal traps, companies can go a long way to bringing their overheads, such as energy, under control.”

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