Small rise in inflation but SMEs positive

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SMALL AND medium-sized businesses have seen a 1.1 per cent increase in annual cost inflation in the first quarter of 2014, according to research compiled for Aldermore by the Centre for Economics and Business Research.

The increase was driven by rising wages, which are up 1.9 per cent year-on-year, contributing 56 per cent to the overall SME inflation rate.

While wages among SMEs are up, wage growth remains subdued by historical standards.

Wage growth was very diverse across different industry sectors. It was particularly strong in construction, which saw an increase of 2.9 per cent, driven by skills shortages in the sector.

Wage growth was more subdued in the manufacturing sector at 1.9 per cent, while wages actually fell 0.4 per cent in the business services sector.

Aldermore’s deputy group commercial director Mark Stephens said: “Despite a marginal rise in cost inflation, Aldermore’s SME Monitor paints a positive picture for SMEs in the first quarter of 2014. Confidence is up across the board and SMEs are showing particular optimism.

“Wages are up, which is fantastic news for employees, and the cost of commodities is down. 2014 looks set to be a strong growth year for the UK economy and UK businesses.”