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Business operating costs fall as recession bites
SMALL firms across northern England are seeing operating costs decline as Britain remains stuck in a period of deflation, a new study shows.
The cost of running a small business in Yorkshire and Humber, the North-East and the North-West fell by 1.4 per cent in the first three months of this year, following the national average, according to the business inflation guide (BIG) from More Th>n Business. The figures show a slight stabilisation, however, as costs plunged by 3.8 per in the final quarter of last year.
The falling cost of labour, advertising, vehicle and raw materials all had an impact, but More Th>n warned that small firms' profit margins remained under stress because of low levels of demand.
Yorkshire's high number of service industry businesses, which grew quickly over the decade to 2008, meant the volatility of price changes could be partially reduced, said Stephen Roper, professor of enterprise at the Centre for Small and Medium Sized Enterprises, Warwick Business School, which developed the guide with More Th>n.
"Yorkshire had been moving towards a service economy and that tends to reduce volatility a bit in terms of business costs. The primary reason is that they tend to be less vulnerable to changes in things like fuel costs and materials."
Mike Bowman, head of More Th>n Business, said: "The fact that we're experiencing such sustained deflationary conditions demonstrates just how deep the recession has become in northern England. While it is cheaper to run a small business, it is clear that demand for goods and services is dropping off considerably, and that is why prices are spiralling downwards.''
The guide, developed with Warwick Business School, is a quarterly index that measures a basket of 20 of the most important items for small businesses need to purchase.
Extreme instability has made planning difficult for firms, Mr Bowman added. "The volatility has made it very difficult to plan and invest, placing tremendous pressure on cash flows and managing stock and staffing levels.''
Britain's Consumer Price Index, which includes mortgage interest payments and council tax, currently shows inflation of 2.3 per cent, while the Retail Prices Index records deflation of 1.2 per cent.
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Sunday 12 February 2012
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