smallbusiness.co.uk: Helping your business think big

New research has suggested that the cost of running a small business continues to decrease.

The More Than Business Inflation Guide claims that the first three months of the year saw the cost of operating a small company decrease by 1.4 per cent, following a 2.4 per cent fall in the last quarter of 2008.

Factors such as falling labour, vehicle, advertising and raw material costs have contributed to the two successive quarters of small business deflation, the group explains.

Mike Bowman, head of More Than Business, says: 'The fact that we're experiencing such sustained deflationary conditions demonstrates just how deep the recession has become in the UK.'

However, he points out that the demand for goods and services is also 'dropping off considerably', leading to small firms lowering prices and seeing profit margins placed under stress.

Stephen Roper, professor of enterprise at the Centre for Small and Medium-Sized Enterprises at Warwick Business School, comments that it is difficult to predict what will occur in the coming months, but he anticipates costs will begin to stabilise in the next quarter.

Yesterday, the Office for National Statistics revealed that the Consumer Prices Index, which is the government's target measure of inflation, fell to 2.2 per cent in May, following the 2.3 per cent that was recorded in April.

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