Small business operating costs are falling

The recession has seen a significant drop in small business operating costs, according to new figures from insurance firm More Than Business.

Small firms reported a 2.9 per cent fall in costs during the last quarter of 2008, according to the firm’s quarterly business inflation guide.

It is reportedly the first time in recent history that the cost of running a small business has fallen.

The fall is due to a number of factors – including a sharp drop in fuel prices, down 18.3 per cent, and raw material costs, down 12 per cent. Manufacturing and contractors reported the biggest rate of deflation, with costs falling by 4.3 per cent and 4.5 per cent, respectively.

Small businesses in the North have seen the biggest fall, with an average deflation of 3.8 per cent. Operating costs in the South are down by an average of 2.7 per cent.

‘After a sustained period of inflation, small businesses must quickly adjust to this deflationary environment, with some benefiting more than others,’ says Mike Bowman, of More Than Business.

‘Deflation will come as good news for transport and haulage contractors, as fuel costs will come down.
‘However, deflation is bad news for businesses that have their assets tied to property or large amounts of stock already purchased, as it will be losing value day by day.’

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