Small business sees costs fall as deflation bites

Published on Tuesday 10 March 2009 20:22

SMALL businesses in Scotland are benefiting from deflation, but not to the same extent as firms south of the Border, according to new research.

A study by Warwick Business School found the cost of running a small firm in Scotland fell by 2.4 per cent in the fourth quarter of last year, compared with a 2.9 per cent drop throughout the UK as a whole.

Deflation was stoked by a sharp fall in fuel prices, down 18.3 per cent, and raw material costs, which fell about 12 per cent.

Mike Bowman, head of More Than Business, which sponsored the study, said: "I think the difference between Scotland and the UK as a whole is that Scotland has a higher proportion of firms working in the services sector, rather than, say, manufacturing."

Colin Borland, from the Federation of Small Businesses in Scotland, said: "This is a dramatic turnaround. It was only last summer the big worry was a seemingly endless spiralling of costs.

"But it is a double-edged sword. Costs are lower, but margins can be squeezed."