Colin Borland of the Federation of Small Businesses takes a look ahead to next month's Spring Forecast from the UK Government as the cost of running a business continues to climb. Mr Borland will be among the expert panellists at The Herald Budget Briefing.

“I used to have a bit of money left over at the end of the month.  Now I’ve got plenty of month left over at the end of the money.”

It might be over 50 years old, but that wry observation – from 70s radio sitcom The Men from the Ministry – is as on-the-nose today as it was back in those cost-of-living dominated days.

According to one recent survey, as many as half of us experience “pay day panic”, counting down the days until we get paid. And that’s for those lucky enough to enjoy the security of a monthly salary. For small business owners and the self-employed, there’s no guarantee of anything unless they balance the books.

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A challenge at the best of times, it’s about to get tougher. At the end of next month, a whole raft of changes come into effect – all as a result of public policy decisions – which will increase overheads.

The start of April will see business rates rises come into effect following the recent revaluation of commercial properties in Scotland, pushing up bills for small businesses across the country.

Standing charges on energy bills will also go up – by more than 40%, we calculate. That means a typical neighbourhood cafe, hairdresser or gym, with a yearly energy use of around 40,000kWh, will see their annual standing charge rise from £3,680 to £5,283.

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Also rising is the national living wage (NLW), further pushing up all the “on-costs” of employment, not least employers’ national insurance contributions (NICs). A small employer with nine staff on the NLW has seen its annual employment costs rise by £25,850 between January last year and this April. That’s enough to employ an extra member of staff.

I could go on – statutory sick pay costs and Companies House fees will also rise, for example – but you get the picture. After almost five years of relentless rises in their costs, there seems no respite in sight and business confidence continues to bump along the bottom.

The latest Federation of Small Businesses (FSB) research shows more than a third of small businesses in Scotland are planning to close or shrink over the coming year, with the proportion even higher among hard-hit retail, wholesale, accommodation and food businesses.

So, there’s a lot coming down the road – and all at a time when turnovers are falling, meaning that margins are disappearing, and firms need to act. 

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In reality, this translates into higher prices for consumers and clients, hiring plans shelved and investments on hold.  More small businesses now expect to shrink (35%) than grow (20%).  And we can see this happening already – as last week’s poor unemployment figures underline.

Former Vice-President Al Gore famously lamented on the 1992 campaign trail that, “everything that ought to be down is up, everything that should be up is down".

We’re not quite at that stage, but if we are to turn things around and get the arrows pointing in the right direction again, the urgent priority for the governments at Westminster and Holyrood must be on keeping business costs under control. That will give firms the breathing space to get through these tough times and start thinking about growing again.

Next month’s Spring Forecast gives the UK government an ideal chance to do just that. It could introduce a statutory sick pay rebate for small and medium employers; uprate the employment allowance so it continues to cover employers’ NICs costs of four employees on the NLW; and cut the renewable obligation on small businesses’ energy bills to mirror the support already extended to households.

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At FSB, our manifesto for May’s Scottish Parliament elections calls on whoever forms the next Scottish Government to commit to delivering a business rates system that works for small operators. That should include continuing the small business bonus scheme and reviewing the thresholds for eligibility to ensure it is still reaching those businesses it was designed to support in the first place.

I accept, of course, that many of factors driving rising costs – from the invasion of Ukraine to how energy markets work – are outwith our direct control.  But that makes it all the more important that we pull the levers to which we do have access.

Every degree we can turn the cost dial down will, in its own way, ease pressures and help small businesses make the numbers add up, easing prices for consumers.  We all need some breathing space, rather than just gasping for air.

Colin Borland is director of devolved nations for the Federation of Small Businesses (FSB).

© Herald Scotland