Costs soar for manufacturers

Escalating costs for small and medium-sized manufacturers are putting the squeeze on profit margins, according to an industry survey.

The Confederation of British Industry (CBI) found that in the three months to July, the number of firms reporting increasing costs had risen by the greatest amount since the SME trends survey began in 1994.

Weakening domestic and export orders, along with the growth in costs, meant that 65% of businesses saw an increase in unit costs. Just 3% said they had fallen, giving a balance of +62%.

However, it seems only a portion of these costs are being passed on - a balance of +20% of firms raised their domestic prices over the last three months, while a balance of +15% raised their export prices.

In addition, the volume of total new orders fell for the first time since January 2006, while optimism also plummeted.

Russel Griggs, chairman of the CBI's SME Council, said: "There is no doubt this is a challenging time for many small and medium sized firms.

"Many are trying to stay on top of higher energy and raw material costs and are finding it difficult to pass these on to customers through higher prices."