UK: SME inflation puts pressure on businesses

SME inflation has risen to its highest point in 8 years according to figures from the Barclay’s Small Business Cost Index (BCI), with basic business costs increasing by 3.2% in the past year alone.

The small business cost index is reported by Barclays and the Centre for Economics and Business Research, with the index monitoring inflationary pressures on SMEs based on a standard range of goods and services they use, such as rent and wages.

By far the largest driver behind recent SME inflation has been the cost of physical inputs, such as basic metals and chemicals, up by 6.8% in the past year.

The most recent research uncovered some of the current pain points for businesses, as well as the areas of the country most affected. By far the largest driver behind recent SME inflation has been the cost of physical inputs, such as basic metals and chemicals, up by 6.8% in the past year. In line with this, businesses in Northern Ireland and Wales are suffering most due to the large proportion of companies in the manufacturing and construction industries in these regions. Labour costs, however, edged up comparatively slowly, increasing by 2.4% in the three-month lead up to January, largely due to the weak growth in wage seen in the UK in general.

As Barclays’ research revealed, the soaring costs have put a great deal of pressure on small and medium-sized businesses, even more so for the 59% of companies that did not have any preparations in place to take account of rising inflation.

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