Inflation 'significantly affecting profitability'
Sep 17 2008
Rising costs are putting a serious strain on the profitability of small businesses, new research finds.
According to the study by business information firm Creditsafe, one in ten firms have seen their expenses go up by more than a quarter in the past year.
In its Annual Report on SMEs: The Punitive Impact of Business Inflation, the most badly affected businesses have been the smallest ones, with companies employing three to four members of staff or 11 to 25 employees are the worst hit.
Newer start-ups were also judged to be most vulnerable, with 76 per cent of businesses set up between 1995 and 1999 seeing higher costs over the past year.
Simon Camilleri, managing director for Creditsafe UK, says 'rampant' business inflation has been caused by fuel and borrowing price increases.
'If the business inflation continues to rise we may see thousands of businesses forced to lay off workers, put a brake on expansion plans and even struggle to survive,' he speculates.
Yesterday, it was revealed consumer price index inflation rose to 4.7 per cent in August, up from 4.4 per cent in July and more than double the government's two per cent target.
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