UK businesses are experiencing above-inflation increases in core business costs leading many to cut back, new research shows.
UK businesses are experiencing above-inflation increases in core business costs leading many to cut back, new research shows.
The findings from the Royal Bank of Scotland show that 55 per cent of those surveyed have seen their fuel costs grow faster than the current rate of inflation, which stands at 5 per cent (see chart).
Additionally, 23 per cent say that the rise in fuel costs has been higher than 10 per cent.
| Type of Cost | % of businesses experiencing inflation over CPI rate of 5% | Average inflation rate |
|---|---|---|
| Fuel | 55% | 9.62% |
| Materials | 27% | 6.07% |
| CPI Inflation | N/A | 5% |
| IT & Infrastructure | 18% | 4.59% |
| Employees | 14% | 4.75% |
| Fixed Assets | 12% | 3.64% |
| Advertising/Marketing | 9% | 2.84% |
| Legal | 9% | 3.25% |
| Compliance & Finance | 7% | 4.64% |
| Other | 6% | 2.19% |
| R&D | 5% | 2.37% |
On the back of this, two thirds report that they will tackle the issue by cutting costs in 2012, while 14 per cent say that they would look at cutting back on staff.
Peter Russel, head of the manufacturing sector at RBS Corporate and Institutional Banking (CIB), comments, ‘There is little or no respite from increased energy costs for many medium-sized businesses.
‘There 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.
Of the 200 senior executives from companies with an annual turnover of more than £25 million that were questioned, 27 per cent say they have suffered a higher-than-inflation cost increase.
‘In these difficult times it is proving much harder to pass on these costs to their customers, leaving profit margins under significant pressure,’ Russel adds.
