IF Chancellor George Osborne said that his Budget was going to be necessarily painful for the long-term benefit of the nation, Britain’s small businesses are already suffering plenty of hurt now as a result of the biggest rise in business inflation.

And the finger is pointing at the running costs of business cars, along with the cost of fuel, says the latest Business Inflation Guide (BIG), compiled by MORE TH>N Business.

The guide, from data gathered during Quarter 1, revealed that small businesses suffered the biggest quarterly rise in costs since data was first recorded in 2005.

The sharp increase of 2.7% between January and March 2010 compounds what were a miserable final three quarters of 2009 for small businesses, says the BIG report.

Faced by slow growing markets, continuing difficulties in accessing finance and a VAT increase next year, the Chancellor’s aim to generate benefits for SMEs in the longer term with cuts in small business tax seem some way off.

The report said that inflation pressures had contributed to four quarters of consecutive cost rises, resulting in a rise in costs of 6.5% for small firms over the last year.

Business car maintenance, VED and fuel push up costs

Specifically, the BIG reported highlighted vehicle maintenance costs and road tax (7.53%), fuel costs (6.3%) and office equipment and furniture (5.8%) that have experienced the biggest increases in price.

Manufacturing companies were affected worse, according to BIG, while those in the north and south of England saw the biggest 2.8% rise in costs. Scotland fared slightly better with the lowest Q1 increase of 2.4%.

“These figures do not make good reading for small business owners,” commented head of MORE TH>N Business, Mike Bowman.

“They’ve already seen revised forecasts for slower economic growth than originally predicted and these cost increases will undoubtedly test cash reserves for small businesses even further,” continued Mr Bowman.

“The price of fuel is an ongoing concern. All evidence suggests this is a cost that is only going to increase. As we know, for many SMEs transport is critical to the successful running of their businesses,” added Mr Bowman.

Small businesses forced into price rises

Stephen Roper, Professor of Enterprise at the Centre for Small and Medium Sized Enterprises, Warwick Business School, said: “Economic recovery looks set to take longer than expected and small businesses are still facing a challenge in getting financial support from banks. Subsequently, they are being forced to push up prices for their customers in order to absorb rising costs.”

Jon Haynes, 30, a self-employed electrician from London added: “The recession has hit us hard, especially with more people taking the DIY option. I think taxes in general should be reduced to help small businesses – with fuel the number one priority.”

The Business Inflation Guide (BIG) has been developed by MORE TH>N Business in conjunction with Warwick Business School. The BIG is a quarterly index that measures a basket of 20 of the most important expenditure items for small businesses.

Further information

You can view the Business Inflation Guide by visiting www.morethanbusiness.com/BIG.

Record rise in business inflation hits small firms