Small shops warned of 2010 commodites rise

23 December, 2009

Small shop owners have been warned that the cost of running a small business is set to rise sharply next year, sparked by rising commodity prices.

According to a report by More Th>n Business, Britain saw fuel costs jump by 3.42%, while raw material prices rose by 1.57% over the Q3 three-month period. Meanwhile, gas prices fell by 16.99% and labour costs dropped by 0.22%. The overall impact meant manufacturing firms’ costs rose by 0.63% over the quarter.

Falls in gas costs were offset by increases in other expenditure items including labour costs and a range of services costs.

The quarterly inflation index revealed the cost of running a small shop rose by 0.5 per cent in Q3 2009. But over the year as a whole costs for small business shops remain 2% lower than a year earlier due to deflation in late 2008 and early 2009.

The report, developed in conjunction with Warwick Business School, measures a basket of 20 of the most important expenditure items for small businesses. Head of More Th>n, Mike Bowman, said: "The results should come as good news to independent small shop owners. The figures are a clear sign that growth is returning to the economy.

"However, the predicted sharp rise in commodity prices as we go into next year is likely to raise the cost of running a small shop, perhaps more than market demand. As a result, it’s important that small shop owners manage cash flow carefully as suppliers begin to push prices up again as markets revive. Small shop owners with a heavy dependence on heating, lighting and fuel are expected to experience the sharpest rise in costs.’’ 

Stephen Roper, professor of enterprise at the Centre for Small and Medium Sized Enterprises, Warwick Business School, added: "We expect small business costs to rise sharply at least until Easter, when we predict prices will reach the same level as they were before the recession. While costs are on the up, the disappearance of deflation means markets are strengthening and consumer spending is growing. This all suggests we are now beyond the crisis, but small shop owners must keep an eye on cash flow.’’





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