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Act Now to “Stem the Tide”, Small Firms Urge, as Producer Price Inflation Hits Record-High 22%

Responding to the news that the consumer prices index rose 9.1%, to a 40-year high, and producer price inflation rose 22.1%, to a record-high, in the 12 months to May, Federation of Small Businesses (FSB) National Chair Martin McTague said:

“The cost of living crisis starts with a cost of doing business crisis. Policymakers should act now to address rising consumer inflation at root, by taking pressure off the small firms that are doing all they can to absorb higher input, labour and energy costs, but can only absorb so much.

“A fifth of firms cite input costs as their main concern. Similar proportions say they are struggling to source the right goods and services or have experienced supply chain disruption. One in seven are struggling with labour shortages. One in ten are still not fully trading.

“On top of those worries are surging energy bills, travel disruption and the need to service debt, the cost of which is rising.

“As margins are eroded, leaving less and less for firms to invest in upskilling and innovation amid labour shortages and net zero targets, the Government must use the tools at its disposal to help stem the tide.

“That means looking at reversing hikes to national insurance contributions, reductions in business rates for small firms, cuts to VAT, especially on energy, and targeted reductions in fuel duty – many businesses, especially in rural areas, have no choice but to use the roads.

“On energy, policymakers should extend the help that’s been issued to households through the council tax system to micro businesses through the rates system.

“Unless action is taken now, surging costs will continue to be reflected in anaemic growth, productivity and investment figures.

“The small business community shrank in size to the tune of 400,000 over lockdowns. If surging costs keep on unaddressed, we’re set to lose hundreds of thousands more.”