In the Budget, Chancellor George Osborne is expected to reiterate the Government's desire to see SMEs driving forward the UK economy.
However, the latest quarterly Business Inflation Guide (BIG) from MORE TH>N BUSINESS, reveals how small businesses are suffering annual inflation rises two and a half times higher than the Bank of England's 2% target.
Figures for the fourth quarter (Q4) of 2010 show that small business costs rose by an average of 1.7%, reflecting a sharp rise in energy and material costs. Raw materials, alone, rose by nearly 5% in the final quarter of the year, along with smaller increases in other costs. These costs are pressurising margins and making profitability more difficult for small businesses.
This is in stark contrast to the third quarter (Q3) which saw small business inflation actually fall by 0.1% as energy prices were relatively stable and fuel prices fell slightly during a period of declining confidence in the UK recovery.
Commenting, Mike Bowman, head of MORE TH>N BUSINESS, said: "The difficult economic climate continues and the costs to small business are a stark reminder of this. Since gaining power last year the Government has been pursuing a pro-enterprise policy and promised support for small business.
"However, these latest inflation figures suggest that George Osborne's Budget on Wednesday needs to deliver measures for small businesses that will help alleviate some of the pressure from increasing core costs. With energy and material costs forecast to continue to rise there is unlikely to be any respite in the near future. We welcome any pro-enterprise measures that look to help small businesses cope in these very difficult economic conditions."
