Small businesses facing unprecedented pressure, says ex-Senator
Small and medium-sized businesses are being overwhelmed by taxes and red tape which are putting their survival at risk, a leading entrepreneur said yesterday.
Jonathan Smith, CEO of The Origin Company Ltd., said the challenges are the greatest seen in decades, with factors impacting the business owner that will force closures and job losses.
The Origin Company owns and operates Central Filing, Guardian and Vault – companies that specialise in general storage, document storage, logistics, paper recycling and IT equipment destruction and recycling.
Mr Smith, a former Progressive Labour Party Senator, said there is little doubt that a litany of pressures are affecting small and medium-sized enterprises.
His comments come on the heels of concern raised by another prominent businessman, Marico Thomas, that government should take a closer look at how they can help entrepreneurs succeed, through concessions or other assistance, such as is provided to large hotels and others.
But Mr Smith cites headwinds facing SME's to include a declining population, a decline in customers' disposable income, a dramatic rise in the cost of doing business and an ever-complex regulatory and compliance environment.
The former Commissioner of Police told The Royal Gazette: “There are more than 30 taxes, fees, compliance and regulatory charges that many SME's contend with.
“These include payroll taxes, customs duties, regulatory fees, financial services taxes, land taxes, health premiums, social insurance and many more.
“All of these must be paid and obligations for rent, suppliers and vendors have to be met, too. Cashflow, working capital and capital investment are under strain; demands for compliance and regulatory reporting have increased overheads markedly.
“For some small businesses, with very limited human capital bandwidth, these demands are onerous and increasing. Tough decisions are being made by business owners each day.”
Mr Smith said the pressures faced by companies are driving prices higher and squeezing people out of business.
He said: “For businesses which import goods, there are between 11-13 separate taxes, charges, costs and fees added at each step of the logistics supply chain. We are experiencing higher costs at each step on that chain.
“The result is predictable: business owners either pass those increased costs on, absorb them if they can, or sell at a loss, which is clearly unsustainable.
“We are seeing three outcomes play out: higher costs of goods and services, declines in revenues and profit for owners and business closures.”
The businessman said that as a consumer and service economy, Bermuda is far better off being the No. 1 tourism destination than having the highest cost of living.
He said: “Many businesses will survive, because there's a tremendous amount of innovation going on. There are smart, new entrepreneurs and there's resiliency and smart human capital in many businesses.
“That innovation and increased use of technology is creating some jobs and costing others. A rebound in the tourism sector and an increase in population will benefit many businesses, but time has run out for some.
“The environment is causing businesses to be highly cautious and to adjust ROI projections and business plans. Owners are looking at data in much shorter time horizons, too.
“There is also caution when it comes to how capital is being utilised and tough decisions being made on employment. You can see that by the overall decline in the working population.”
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