Cost of fuel hits SMEs in transport and distribution

Small business success hampered by raw material costs

HAVING survived last year’s recession, small businesses in the transport and distribution sectors are facing another barrier to profitability and expansion: the soaring cost of fuel. The AA reported that over the Easter weekend average UK fuel prices fell just short of the record, reaching 119.46p a litre. Meanwhile PetrolPrices.com reported that average diesel prices had broken the 120p per litre barrier in the week following Easter. So it comes as no surprise that 54% of small- and medium-sized businesses (SMEs) see the cost of fuel as the key issue to limiting their success, according to a survey of SMEs by GE Capital, a provider of SME financing. The GE Capital report, based on interviews with 500 UK SME owners and managers, found that the worry over fuel costs was higher even than fears over the health of consumer and business spending in the UK and the increased burden of regulation, which 30% of SMEs in this sector identified.

• 54% see price of fuel as one of biggest limitations
• 30% say fears about consumer and business spending
• 30% say the increased burden of regulation
• 24% of companies see high raw material and inventory costs

“With nearly a third of firms (27%) still saying that they will shrink this year, it is vital that government continues to focus on maintaining the right conditions to support growth in the transport and distribution sectors,” commented John Jenkins, chief executive officer of GE Capital. The report also showed that the government’s emphasis on an upturn that will be largely export-driven may be at odds with the expectations of SMEs that account for over 50% of domestic GDP. The vast majority (91%) in this sector said that they expect their growth to come from domestic sales over the next three years making them reliant on the fortunes of the UK economy.