Inflation for small businesses hits nearly 10%
25 September 2008
Small businesses are facing annual cost increases of 9.9%, double the general rate of inflation, according to the newly launched Business Inflation Guide (BIG) from MORE TH>N BUSINESS.
In the second quarter alone, small businesses, representing 97% of UK business, faced cost increases of 3.4%, with micro businesses being the hardest hit.
"We suspected that UK small businesses were under great cost pressures but we could find no data to confirm this. So we set out to create the first purpose built measure of small business inflation. The results surprised even us", commented Mike Bowman, Head of MORE TH>N BUSINESS. "These businesses are the unsung heroes of the British economy, representing over 1.6 million businesses in the UK. Now that we have a true picture of rising costs for small businesses, people will be asking the Government what realistic measures can be taken to support them, particularly in the current economic climate."
The Business Inflation Guide (BIG), developed in conjunction with Warwick Business School, reveals that small businesses are bearing the brunt of price increases across almost all expenditure items, but due to their cost structures, they are suffering more than general inflation indicators suggest, in everything from fuel and energy to labour costs and raw materials.
Unsurprisingly, small businesses operating in the manufacturing sector face greater rises than services firms, with increases in the cost of raw materials as well as energy and fuel contributing to a 4.2% rise during Q2 and 11.9% over the last year to June 2008.
Also highlighted in the Business Inflation Guide are important regional differences. Scottish small businesses face the lowest regional price rises (2.8% during Q2 and 8.5% over the last year since June 2007) while the Northern regions are worst affected with a Q2 increase of 3.9%, amounting to an annual increase of 11%.
"When costs are rising small businesses really should leave no stone unturned in the search for savings," continued Mike Bowman. "The top priority, if they haven't already done so, should be to review all suppliers and negotiate on prices and payment terms - particularly with regard to energy suppliers and other important cost items. Seeking more efficient ways to use energy in the future should also be a priority."
Stephen Roper, Professor of Enterprise, at the Centre for Small and Medium Sized Enterprises, Warwick Business School said, "The Business Inflation Guide fills a gap in our understanding of the pressures on small firms. This index, supported by MORE TH>N BUSINESS, gives us a robust and quantifiable insight into the costs faced by small businesses in an increasingly difficult economic climate".
