News

December 23, 2009

Business costs predicted to rise sharply in early 2010

Start-ups will be faced with a sharp increase in running costs in early 2010, although they will begin to benefit from the economy’s return to growth, according to insurance firm More Than.

The More Than Business Inflation Guide showed that the cost of running a small firm rose by 0.6 per cent in Q3 2009, mainly because of rising commodity prices. While fuel costs increased by 3.42 per cent during the three-month period, raw material prices also rose by 1.57 per cent. However, labour costs fell by 0.22 per cent and gas prices dropped by 16.99 per cent.

“The results should come as good news to small businesses,” said head of More Than Business, Mike Bowman. “The figures are a clear sign that growth is returning to the economy. However, the predicted sharp rise in commodity prices as we go into next year is likely to raise the cost of running a small business, perhaps more than market demand.

“As a result, it’s important that small-business owners manage cashflow carefully, as suppliers begin to push prices up again as markets revive,” he added. “Business owners with a heavy dependence on heating, lighting and fuel are expected to experience the sharpest rise in costs.”

Stephen Roper, Professor of Enterprise at Warwick Business School’s Centre for Small and Medium Sized Enterprises, predicted that costs would rise steeply until Easter, when they are likely to reach pre-recession levels.

“While costs are on the up, the disappearance of deflation means markets are strengthening and consumer spending is growing,” he said. “This all suggests we are now beyond the crisis, but small-business owners must keep a close eye on their cashflow.”