Home Business NewsBusiness ‘True cost’ inflation for SMEs even higher than CPI, shows new research from Barclays

‘True cost’ inflation for SMEs even higher than CPI, shows new research from Barclays

by LLB Reporter
21st Mar 17 1:23 pm

Barclays Business Banking

UK CPI Inflation today has been announced at 2.3%, new independent research from Barclays Business reveals small business costs rose 3.2% in the year to February 2017, meaning SMEs are currently facing higher effective rates of inflation than households.

Ian Rand, CEO for Barclays Business Banking said: “Today’s rise in CPI inflation will be a blow to hard working business owners who are going through an extreme period of uncertainty. Those sectors most exposed to physical input costs such as manufacturing and construction, will continue to be squeezed.

“Inflationary pressures, coupled with the weak pound, will force SMEs to lift their prices in order to protect their profit margins. Rising factory gate prices will sustain ‘pipeline’ pressures on inflation, which is likely to see the headline rate increase further during 2017. With small businesses playing an increasingly important role in strengthening the UK economy – and the rate of inflation expected to remain high for the remainder of 2017 – they must plan ahead to ensure they are well-positioned for further cost increases.  Exploring new avenues of growth should be an important consideration for any business struggling with rising costs.”

Methodology:

  • The Index, created by the Centre for Economics & Business Research (CEBR) in conjunction with Barclays, tracks the real impact of business costs faced by these business and is designed to capture typical costs faced by these businesses. The index tracks developments going back to 2007 and is calculated using the annual cost change of a basket of goods and services associated with the average SME.
  • Specifically, the basket includes 33 different inputs that can be grouped into physical inputs, utilities, construction, transport & storage, IT and telecommunications, financial services, business services, other services, rent and employment.
  • The information for these inputs comes from various sources, namely: ONS Consumer Price Index, ONS Producer Price Index, ONS quarterly Construction Price and Cost Indices, ONS Services Product Price Index, ONS average weekly earnings data, and the CBRE Commercial Property Index. These inputs are weighted in order to reflect the true costs faced by SMEs.

 

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