Small businesses experience drop in running costs

The latest inflation report released by More Than Business has revealed that the operating costs of small businesses have fallen considerably. Their ‘Business Inflation Guide' (BIG), co-produced with the Warwick Business School, has reported an average 2.9% fall in running costs for the last quarter of 2008.

It is believed that the fall is primarily due to an 18.3% decrease in the price of fuel and a 12% reduction in raw material costs.  The largest rate of deflation is said to have been experienced by contractors, with costs having fallen by 4.5%.

Stephen Roper, Professor of Enterprise at the Centre for Small and Medium Sized Enterprises at Warwick Business School, has said:

 "Small businesses will continue to experience deflation over the next quarter as the UK economy continues to weaken. As a short-term benefit, deflation will provide a much needed pressure valve for small businesses which are currently very cash constrained."

However, while this may seem like good news to many small businesses, Roper has emphasised that there are still longer term implications to be considered:

"We are seeing very specific deflation, caused by a sharp drop in fuel and raw material costs. While small business owners will be happy to see costs come down, it also indicates that markets are weakening and demand is low - which in the long term is not good for business."

09/03/09