Double Inflation For Small Businesses

Cost rises are the latest knock for small businesses trying to stay afloat in the economic crisis.  A report has shown that small businesses face yearly cost rises that are twice that of the rate of consumer inflation, a staggering 9.4 per cent.

The report, by insurance firm More Than, showed that although inflation rates for small businesses had seen a drop in the third quarter by half a percentage, the report also showed that manufacturing businesses are suffering the hardest cost rates which have risen to over 11 per cent.

North and South of England Suffer Hardest

The Business Inflation Guide shows that the North of England are dealing with the highest cost rise, as many small businesses face rises of 10.4 per cent, compared with the South of England which saw a rise 9.3 per cent.

Head of More Than Business, Mike Bowman said, of More Than Business, said: “Cost reductions are not filtering down to the small business economy as quickly as they have for consumers.  Small businesses are the lifeblood of the UK economy so it’s worrying to see that they are facing an inflation rate twice that of households.”

Fuel Cost Cuts To Thank For Quarterly Cut

The inflation drop experienced by small businesses in the third quarter is said to be largely in response to the cost cuts seen in fuel, insurance, material and vehicles.  The drop saw the small business inflation drop from 9.9 per cent in the second quarter to 9.4 per cent in the third quarter.

Bowman went on to say, “With the credit crunch every business is going to find life tough.  The key message is that any small business should be looking at its cost base and reviewing everything that is essential.  I’m not sure there will be parity, but there will be a continuing trend downwards over the coming quarter.”

More Than are claiming that the largest cost for a small business is the rise in labour costs and this pressure is having a knock on effect on the small business inflation.  The small business inflation is more than twice that of consumer inflation which stands at 4.5 per cent.

Pressure Is Too Much For Small Businesses

The Business Inflation Guide was also compiled with the help of Warwick Business School.  Stephen Roper of the Business School gave some insight into the figures. “Small businesses may be getting better deals on items such as fuel and insurance at the moment but they still face massive pressure on margins.  Their customers are demanding good deals as they themselves come under pressure and other important costs such as labour continue to increase,” he said.

The North and South of England were the hardest hit by the inflation rates, dealing with 10.4 per cent and 9.3 per cent respectively.  Following closely behind was the Midlands and Wales which each saw inflation of 9.2 per cent and then Scotland whose small businesses dealt with 8 per cent inflation.

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