Inflation pressures UK business

 

•       Fuel costs increasing by over 10% for one in four companies

•       27% see cost of materials increasing faster than Consumer Price Index

•       Cutting costs leading business priority for 2012

 

New research shows many UK businesses are suffering higher than inflation increases in their core business costs. The research, carried out by Royal Bank of Scotland, has found over half of UK businesses have seen their fuel costs grow faster than the current 5% CPI rate of inflation.

 

Nearly one in four (23%) have seen their fuel costs increase by over 10% in the last 12 months, while the cost of raw materials has also increased above inflation, with an average increase of 6.1%.  

 

The survey found that this increase in costs has led to an increased determination by firms to cut back. Cutting costs was seen as the most important commercial priority for 2012 with two-thirds of businesses looking to cut back.  Only 14% were looking to cut back on headcount.

 

Commenting on the findings, Peter Russell, Head of Manufacturing Sector, RBS Corporate & Institutional Banking (CIB), said: "There is little or no respite from increased energy costs for many medium sized businesses.

 

These are core costs which have a direct impact on price competitiveness. Whilst commodity prices have eased back of late, businesses remain focused on how to tackle mounting energy costs.

In these difficult times, it is proving much harder to pass on these costs to their customers, leaving profit margins under significant pressure."

 

The survey of over 200 senior executives found other costs, often seen as non-core, have actually got cheaper in real terms. Research and development costs have increased by an average of just 2.4%, advertising and marketing by 2.8% and legal costs by 3.3% - all well below the headline rate of inflation.