Small business inflation: double consumer rate

Rising labour costs squeeze margins says Business Inflation Guide

Small business tradesmen and suppliers are facing annual cost increases of 9.4% – double the rate of consumer inflation.

The additional costs facing business van users have been revealed in the second Business Inflation Guide from More Than Business.

More Than Business reports inflation for small businesses fell 0.5% in quarter 3, 2008 (down from 9.9%). This drop was thanks to a reduction in fuel, material, insurance and vehicle costs.

But while business owners and sole traders could take relief that these costs were falling, rising labour costs – the largest proportion of expenditure for small businesses – are squeezing margins.

Annual costs have increased by 11.3% among manufacturing firms – significantly more than the service sector (9%). And almost 2% higher than small businesses overall.

Mike Bowman, head of More Than Business, said: “Cost reductions are not filtering down to the small business economy as quickly as they have for consumers. This data provides useful insight as attention turns to helping UK businesses through the recession.

“Small businesses are the lifeblood of the UK economy. So it