A leading business organisation has highlighted the problems faced by industry after new figures show a steep rise in business costs.

According to figures from the Office for National Statistics (ONS), producer input price inflation stands at a record-high 18.6 per cent, and the consumer prices index at nine per cent and could go higher.

It says the disparity between the two figures shows how businesses are having to absorb rising costs rather than pass them on to the consumer.

How could Government help businesses manage costs?  

The FSB says that although the Government cannot control the wholesale price of oil and gas, it can go further to help small firms with property costs – increasing the ceiling for small business rates relief and extending the energy support issued via the council tax system to the rates system.

In addition, a sick pay rebate for the smallest businesses would give them a measure of breathing space.

However, what can businesses do for themselves now?

Make better use of space

Maximise office space by checking whether you are stocking too many supplies or making optimum use of office furniture. You may also be able to renegotiate your lease or find cheaper premises.

With advances in communication technology, you could also explore the possibility of running your business from home or on the road.

Review your suppliers

Make sure you are getting the best value for money, particularly in areas like communication with mobile phone deals and the cost of broadband and consider cloud-based software for general bookkeeping and data management.

Go for ‘nearly new’ equipment

Sometimes, it may not be possible to invest in the latest piece of equipment and so it may be worth considering refurbished or remanufactured supplies.

Properly refurbished computer equipment can result in big savings as can equipment like copiers, without sacrificing too much performance.

Many refurbishment companies even offer warranties on the goods they sell. However, you should be aware that the purchase of refurbished or recycled goods could affect your ability to claim certain reliefs, such as Capital Allowances.

Make better use of your accountant

While accountants can manage your books and compliance tasks, they can also provide strategic advice and identify areas where savings can be made.

Link: Input price growth hits record-high

Research from the Federation of Small Businesses (FSB) shows that successful applications for finance among members have dropped to the lowest level on record.

Conversely, figures from the Bank of England show the annual growth rate of lending to big corporates has increased significantly since the start of the year.

It has led to the accusation that banks are “pulling up the drawbridge” on lending to small businesses.

The FSB’s quarterly Small Business Index (SBI) show just 43 per cent of applications have been approved and that just nine per cent applied in the first quarter of 2022.  That is the lowest number since SBI records began.

Lack of finance ‘a threat to economic growth’

The business body has now called for a culture change in financing and has warned that economic growth will be threatened otherwise.

Commenting on the survey, FSB national chair Martin McTague said: “Lenders pulling up the drawbridge for small firms will threaten our already faltering economic recovery.

“Businesses are born every day across the UK – many need funding to get off the ground, ensuring they reach a stage where they’re profitable and creating opportunities.

“A lot of those who’ve worked tirelessly to adapt, survive and thrive over lockdowns need finance too, empowering them to take their firms to the next level, driving our economic recovery and the transition to net zero in the process.”

A large proportion of what is available is being used to cover cashflow problems, often caused by late invoice payments from customers, according to the FSB.

Managing cash flow problems caused by late payments

The survey shows that 61 per cent sought traditional overdraft or loan products, while a quarter applied for asset-based finance, such as invoice finance.

Other methods included smaller numbers seeking funds through peer-to-peer platforms (seven per cent) and/ or crowdfunding (five per cent).

Your accountant will be able to provide advice and guidance.

How can businesses obtain necessary finance?

Measures that might persuade lenders to provide finance might include:

• Keeping balance sheets and other documentation to show the business has been well run
• Improving the company’s credit rating
• Producing a business plan that is strong, concise and clear
• Opting for the appropriate kind of loan, like instalment, short term or line of credit
• Having the ability to provide collateral for the loan

If you are looking to finance your business, you should seek professional advice beforehand.

Link: Lending to small businesses hits all-time low

The ‘biggest change to rent law in a generation’ will be delivered with the Renters Reform Bill (the Bill).

The Government says it says it will improve the lives of millions of renters by driving up standards in the private and social rented sector, delivering on the Government’s mission to level up the country.

Levelling Up and Housing Secretary Michael Gove said: “This is all part of our plan to level up communities and improve the life chances of people from all corners of the country.”

A new Private Renters’ Ombudsman will be created to enable disputes between private renters and landlords to be settled quickly, at low cost, and without going to court.

The new law will be put in place for the 4.4 million households privately renting across England by extending the Decent Homes Standard to the private rented sector for the first time – giving all renters the legal right to a safe and warm home.

It is designed to ensure all renters have access to secure, quality homes, levelling up opportunities for the 21 per cent of private renters who currently live in homes of an unacceptable standard.

Part of the Bill will also ban Section 21 ‘no fault’ evictions, protecting tenants from unscrupulous landlords, while strengthening landlords’ legitimate grounds for taking back their property.

Link: The Renters Reform Bill

From 6 July 2022, the Primary Threshold (PT) for National insurance will increase to £12,570. This is the threshold at which employees begin paying National Insurance contributions (NICs).

This will bring the rate in line with the current rate of personal allowances for income tax and means those earning below this amount each year will pay no tax or NICs.

It also means that a larger proportion of a person’s income will be free of NICs, meaning that most employees will enjoy a cut to their NICs.

This jump in the PT comes at a time when many employees are experiencing difficulties due to the cost of living and follows the Government’s decision to increase NIC rates in April.

On April 6th, the rates of NICs increased by 1.25 percentage points. This means, for example, that the main rate for employees rises from 12 per cent to 13.25 per cent.

The increase in NICs was legislated for to increase spending on health and social care and will be formally replaced by a new Health and Social Care Levy in April 2023, which will maintain this increase to provide funding to these sectors.

The increase in the PT means that most employees should see minimal change in their NIC bill, while lower earners below the limit might see their contributions cut entirely.

How does this help self-employed individuals?

The Lower Profits Limit (LPL), the point at which self-employed people start paying Class 4 National Insurance, will also be increased to £12,570 at the same time.

This measure also reduces Class 2 NICs liabilities to nil on profits between the Small Profits Threshold (SPT) and LPL.

This ensures that no one earning between the SPT and LPL will pay any Class 2 NICs but continue to accrue National Insurance credits.

What about employers’ contributions?

The changes to the NI thresholds do not affect the Secondary Threshold. This is the point at which employers must start making contributions, which remains at £9,100 per year.

As such, employers will have to continue paying NICs for their employees once they earn £9,100 per annum or more, even though the employee does not have to contribute until they earn £12,570 per year.

Do Directors enjoy the same threshold?

The PT for Directors for the entire tax year is £11,908 per year. Changes to the NI rules and an increase in dividend tax rates mean that it is important to reassess your remuneration strategy to minimise the tax burden on the business and individuals.

Link: Rates and thresholds for employers 2022 to 2023