The increasing cost of doing business in Bermuda could put businesses here at a competitive disadvantage, according to two of the Island?s business leaders.

Speaking yesterday at the Bermuda Employers? Council (BEC) annual general meeting, outgoing president Eddie Saints and Bank of Bermuda boss Philip Butterfield both sounded warning bells on the impact to Bermuda businesses from high inflation levels and increasing costs ? particularly medical insurance with premiums jumping an average of 17 percent for the year.

Mr. Butterfield, who took up the reins of the Island?s largest financial services company when its sale to multinational banking giant HSBC Plc. was closed in February, said Bermuda remained a good place to do business but increasing costs could undermine its advantages.

?It seems the costs of doing business in Bermuda need attention. As companies we may not pay tax on our profits but the recent increases in employment tax and social insurance premiums, as well as the soaring cost of medical insurance, shows that our cost burden is becoming too heavy.?

Mr. Saints ? who is CEO of Cable & Wireless Bermuda Ltd. and who has led the BEC for the last three years ? said in his report to the group?s members that he was alarmed at how more and more Bermuda families were living from pay cheque to pay cheque, and were often required to work more than one job to make ends meet.

?Many depend on three, four, and sometimes five sources of income in order to maintain their basis standard of living, month to month.?

He said that the struggle by some families to manage in Bermuda?s pricey environment was also a scenario facing some Bermuda companies.

?Businesses in Bermuda share the same concern for their own economic health as do families. This year alone, the increased burden of social insurance and payroll tax, together with health insurance premium on average increases of 17 percent, and the rising rate of inflation (which he said was nearing four percent), are causing many small business to exist on slim margins if any at all.?

To put some perspective on how thin profits are for some companies, Mr. Saints said: ?I am increasingly alarmed when I hear a number of small businesses saying that the profits they earn are less than the amount of tax they pay. ?Business are having to shift the burden of costs to their employees, particularly health care cover.?

Beyond concerns that businesses may find it hard to maintain economic viability, Mr. Saints also warned that social programmes supported by corporate funds could also suffer.

?My fear is that increasing costs and their subsequent impact to constraining businesses ability to continue to support our community.?

Mr. Butterfield cautioned there may be unrealistic expectations on how much international business could carry Bermuda?s economy.

?I am concerned that the complacency which results in our dependence on the international business sector, being viewed the Island?s ?holy grail? in so many ways, from charitable donations to employment prospects.

?There is also a certain amount of complacency within Government in terms of how much more can be squeezed out of the corporate sector,? said Mr. Butterfield, who is the brother of Deputy Premier Dr. Ewart Brown and who was addressing a group that included Premier Alex Scott, Labour & Home Affairs Minister Randy Horton and Finance Minister Paula Cox.

On top of higher costs, Mr. Saints said employers were also worried that the recent 4.5 percent wage increase recently inked for Government workers could be used as a benchmark for other wage negotiations.

?This all creates an air of caution on which way the economy could head,? he said.

Mr. Saints spoke of inflation concerns first last month ? with the Island?s inflation rate having hit 3.9 percent in September ? warning that there could be company closures and job losses if the rate of cost increases was not contained.

The BEC and other groups have also recently spoken out against Government?s plan to do away with an overtime clause in the Employment Act, saying that doing so would leave employees and employers without the ability to collectively bargain.

Yesterday, Mr. Saints said he was not the only one worried with there being ?shared concern over what appears to be a prosperous and healthy economy. Our problem is bigger than you expect?.

Beyond concerns that businesses may find it hard to maintain economic viability, Mr. Saints also warned that social programmes supported by corporate funds could also suffer.

Mr. Saints steps down from the BEC after serving the maximum term allowed, and is being replaced by William DeSilva of Bermuda Gas.