New research has revealed that small to medium businesses in the UK are paying over £3,700 every year in hidden charges or fees charged by financial institutions
A staggering seven out of 10 small and medium businesses are living in fear that escalating costs could force them to shut down, yet they’re reluctant to pass these onto consumers.
A survey of 500 small UK businesses revealed a worrying 88% claim they are doing ‘all they can’ to reduce overhead costs, but a significant 69% still fret their business may be forced to close.
As many as 49% attribute this to the relentless increase in material costs, while 19% blame hidden fees charged by banks.
Small British businesses estimate they are shelling out more than £3,700 every year in concealed charges or fees levied by financial institutions for international transactions, which could equate to three months worth of business rent in major UK cities.
There’s a chance that figure could rise, as 15% of businesses have ambitions to expand internationally. In an effort to shield customers from further price hikes, 35% are attempting to negotiate better rates with suppliers and 31% are cutting back on energy use.
Despite these efforts, a disheartening 56% have had to implement redundancies, with a massive 84% of those saying it was their ‘last resort’.
The research was commissioned by Wise, which is spearheading its End the Opt Out campaign to change legislation so small businesses have transparency on fees they are charged for international transactions. According to the firm’s research, this amounts to a whopping £2.8bn per year.
Arun Tharmarajah, director of European payments at the international money app for consumers and businesses, has spoken out about the tough decisions business owners are having to make in these challenging times.
“Small businesses don’t want to pass rising and unexpected costs onto their customers, given the pressure people’s pockets already face this winter. This leaves many businesses in a tricky position,” he said.
He also highlighted that those who transfer money overseas as part of their business operations often fall victim to financial providers who charge grossly unfair fees hidden in the exchange rate.
Other challenges small businesses are grappling with include increased shipping costs (39%) and staff wage increases (35%). Regrettably, 89% believe their business would have been more profitable in the last 12 months if costs hadn’t skyrocketed.
However, 35% are also concerned about the impact of high energy prices as we head into the festive season. According to Onepoll figures, this leaves a quarter believing that this Christmas will be the most crucial their business has ever faced.
Arun Tharmarajah further added: “As small businesses navigate rising costs, it’s essential to remain agile and creative in finding solutions that don’t negatively impact their customers.”
“Things can change quickly, whether that’s streamlining operations, negotiating better terms with suppliers, or adopting new technologies that help to reduce costs. Ending the Opt Out, and improving legislation to ban hidden fees, is a simple, cost-free way of helping the country’s small businesses.”
Davide Troise, who founded Troise & Sons barbers in Hackney, London, believes his business has defied the odds and he now has plans to expand into Europe. However, as he attempts to extend his services to Barcelona, dealing with UK banks has become a challenge as he seeks the necessary information to make the best decision for his international expansion.
He stated: “Many small businesses in the UK might be looking to expand into international markets to benefit from a larger customer base like us – but there can be lots of barriers in the way of doing this. Having built a successful operation in London, we are now looking to expand into Spain.”
“It can be very slow and complicated to deal with banks when it comes to this international expansion, and it is made even worse when they are ripping you off with hidden fees.”
TOP 10 CONTRIBUTORS TO INCREASED SMALL BUSINESS COSTS:
- Costs of materials
- Increased overseas shipping costs
- Staff wage increases
- Additional supply chain costs
- Fees charged by banks and financial institutions for day-to-day banking
- Hidden fees
- Increased labour requirements
- Additional staffing costs
- Tariffs applied by other countries
- Red tape
