Third of UK SMEs avoid passing supplier costs onto customers

While four in five small and medium-sized (SME) businesses have faced increased prices from suppliers over the past six months, 32 per cent have managed to absorb the increased costs without passing them onto customers.

According to a report by MarketFinance, which surveyed 1,000 SME owners across the UK, only 21 per cent of smaller businesses are passing a portion of the increased cost onto their customers.

Businesses located in the south west of England and Northern Ireland are least likely to absorb the costs, while companies in the north west and Yorkshire are most likely to take on the increased prices.

A rise in prices for raw materials was identified as the top reason for overall rising costs, most felt by businesses in the north west of England – 85 per cent – followed by staff shortages, the ongoing impact of the pandemic slowdown, and supply chain disruptions caused by a shortage of truck drivers.

Across the UK, a quarter of SMEs reported supplier prices have almost doubled over the past 6 months.

The festive season

SMEs said that they could increase prices if pressure during the Christmas period “gets too much.”

Two fifths reported they could increase their prices by as much as 10 per cent in the run up to the holiday.

Longer term, nearly three quarters – 73 per cent –are already preparing for the current higher prices to be the norm until at least the end of 2022.

Just over a third of SMEs have taken out loans or are using other finance facilities to manage the increased cost of doing business.

“The current economic environment with rising costs is presenting some headwinds and headaches for SME owners but they are proving to be as resilient as ever,” said Anil Stocker, chief executive, MarketFinance. “The vast majority have been thinking ahead and accounted for the longer term scenario, which will hold them in good stead to do business.

“It’s great to see that SME owners are taking the long view and preserving their customer relationships and managing suppliers by having a finance facility in place to deal with the overhead for now.”

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