Fuel Price Rises Will Force Firms to Make Cuts
Small businesses will be under severe pressure to cut costs — including freezing pay and laying off staff — if fuel prices continue to rise, new research has revealed.
A Federation of Small Businesses (FSB) survey of more than 400 small firms found that January’s 0.76p per litre fuel rise will force 26% of respondents to pay an extra £500 to £2,000 in fuel costs over the next six months. The research also found that three quarters of small firms said further fuel prices would reduce their profitability.
A further increase of 1pence a litre is scheduled for April, although the Chancellor has said he will review this in the March Budget. The cost of a litre of unleaded petrol is now almost £1.30 because of high fuel duties, the January VAT rise and global oil prices.
“The problem is that small businesses can’t absorb the cost like big businesses can.”
said FSB press officer, Prue Watson.
“They’ll have to increase the prices of their goods and services, so they will be less competitive. That coupled with the VAT rise — where again they are unable to absorb the cost — puts them at even more of a disadvantage.”
Watson warned that those small businesses which do try to absorb the cost will have to save money elsewhere.
“They may have to freeze staff wages — or even lay off staff — or cut back on areas of their businesses such as marketing, which would mean they can’t reach out to new customers.”
Small businesses facing difficulties should make themselves more efficient, Watson advised, by cutting down on the number of company vehicles, finding alternate means of transport or even travelling less.
Owner of small business Sixth Story, Sian Lenegan, said:
“I’ve already noticed a big increase when filling up the car, not only from a personal expenditure point of view but also going to meetings.”
“We have clients in Scotland and London so it makes meetings more expensive. We can use trains but they aren’t cheap either. The main impact will be on any of our clients who are in the transport business — they will be tightening their belts so their marketing budget will be reduced. That will have a knock–on effect on our business.”