‘Toxic Cocktail’ of rising costs, growing inflation and lower profits put businesses at risk

Business News News

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The Institute of Directors (IoD), the Federation of Small Businesses (FSB) and the Confederation of British Industry (CBI) have all raised concerns that an increasing number of British businesses could face insolvency in the coming months.

A new report from the CBI has revealed that businesses are losing confidence, after a poll in late February revealed that 42 per cent of companies expect their input costs to rise over the next three months, up from just 12 per cent in January.

The latest inflation figures from Office for National Statistics show that the Consumer Prices Index (CPI) rate is already beginning to climb, rising from 1.8 per cent in January to 2.3 per cent in February – with economists predicting a rate of three, or maybe even four per cent by the end of 2017.

The FSB has also conducted its own research which has found that more than half (54 per cent) of businesses are anticipating a significant fall in profits once changes to business rates take effect in the coming weeks.

The study also found that one in five businesses might consider selling up – or even closing down – as a result of the increased financial strain.

Richard Lim, chief executive of data analyst Retail Economics, said: “Retailers are facing a toxic cocktail of rising sourcing costs from past falls in sterling and spiralling operating costs from business rates and increases in the National Living Wage (NLW). We’re only seeing the thin end of the wedge in terms of inflation.”