Small business inflation 'still twice CPI'

Small businesses in the UK are still facing a steep rate of inflation, according to the second quarterly Business Inflation Guide (BIG).

The report, produced by More Than Business and Warwick Business School, measures the price of 20 of the most important goods and services for small firms.

It found that small business inflation had slowed from 9.9% in the second quarter to 9.4% in Q3, due to a drop in fuel, insurance, material and vehicle costs.

However, More Than Business is warning that rising labour costs - the biggest expenditure for small businesses - are putting the squeeze on margins and keeping small business inflation at more than double that of the UK's consumer inflation rate (CPI), which stands at 4.5%.

Northern businesses appear to have been hit the hardest, at 10.4%, while inflation was lowest in Scotland (8.0%).

Inflation was found to be highest among manufacturing firms, running at 11.3%, but stood at 9% for the service industry.

Head of More Than Business Mike Bowman said: "With the credit crunch every business is going to find life tough.

"The key message is that any small business should be looking at its cost base and reviewing everything that is essential."

However, Bowman added that small business cost increases were expected to move closer in line with CPI.

"I'm not sure there will be parity, but there will be a continuing trend downwards over the coming quarter," he said.