Over the last 12 months 86% of small businesses have seen an increase in their overall business costs, according to the Forum of Private Business.

The forum’s latest ‘Cost of Doing Business’ survey showed the uphill battle firms are facing in order to make ends meet, despite positive signs of an economic relief.

The group believes the increased business costs is part due to market forces, as well as businesses having to pay increased salaries to attract and retain staff, the cost of auto-enrolment on small employers and the cost of the EU ruling on holiday pay.

The report also identified that 37% of small business owners admitted to being unable to pass any rising costs onto customers, forcing them to cut their own costs to keep prices static.

Ian Cass, managing director of the Forum of Private Business, said: “We cannot see how this can continue as 37% of our members feel that the constant high cost of doing business is a greater detriment to their cash flow than late payment (21%) or unexpected price rises (20%).

“Following the diktats of parliament, wage increases are due to rise significantly above inflation over the next few years, but with labour intensive firms reporting far higher cost rises it is difficult to see how this is sustainable unless there are significant changes.”

Cass added: “27% of business owners reported that reducing red tape was the solution, but there has been no noticeable change over the last decade. Most of the costs are based on regulatory issues and the biggest problem for our members is that the costs cited this year have an impact on the bottom line and they are unavoidable.”