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UK200Group members comments on the cost crisis faced by SMEs

By CreditMan Tuesday, October 13, 2015

Members of the UK200Group of independent accountancy and law firms have today commented on new research that show SMEs are confident despite rising costs.

A new survey conducted by Clydesdale and Yorkshire Banks has revealed that despite SMEs facing increasing costs, the majority are still planning for growth.

The research found that 65 per cent of SMEs said their costs had risen in the last 12 months, with raw materials, salaries and utility costs representing the largest area of concern for SMEs.

The sectors most affected by rising costs during the last 12 months were manufacturing, food and drink, hospitality and the legal industry.

However, despite these increased costs, 75 per cent of SMEs are expecting to invest in their business in the coming year, with new equipment, premises and staff topping the list of priorities for business owners.

Jonathan Russell, Partner at UK200Group member firm ReesRussell:

SMEs across the board have been under pressure for many years now as regards margins, but this till now, had in the main, been because of downward pressure on their selling price more than their purchase prices.

The point has been reached where there is no longer margin to give away and prices are starting to rise and with business confidence slightly higher, there is a growing acceptance that these must be passed on to the customer.

There are obvious exceptions such as the food industry, but many industries have benefitted from the reduced energy, and in particular fuel, prices. Many businesses are starting to look at investment, having delayed over past years, but investment now is very considered and can be in labour, equipment or both. Technological advances are helping some businesses maintain margins with efficiencies, rather than giving the opportunity to increase returns.

Duncan Montgomery, Tax Partner at UK200Group member firm Whittingham Riddell:

The legal sector in particular has seen a rise in wages, as good quality individuals in certain sectors, such as commercial property, are becoming increasingly harder to find. Careful management, proper incentives and making sure that legal firms benchmark their performance by fee earner and partner properly, all help to keep the cost to income ratios in bounds.

Established in 1986, UK200Group is the leading mutual professional association in the UK with some 150 offices of quality-assured member accountancy and lawyer firms throughout the UK totalling more than 550 partners who act for business clients and global links in nearly 70 countries. Our member’s contributions reflect the views, questions and answers arising from their 150,000+ SME clients. UK200Group provide services and products that are designed to enhance the business performance of its members. Telephone 01252 401050, email or visit