The main contributor to the rise in cost inflation was improved wage growth. Average total pay across the UK SME sector rose year-on-year by 1.1% and this is expected to continue in the coming months. The rise in wage growth was most pronounced in the construction and manufacturing sectors where the UK is currently experiencing a skills shortage.
The cost of other significant inputs to UK SMEs, such as business and construction services also rose strongly this quarter, by 2.3% and 3.1% year-on-year respectively.
Today’s report shows that the cost of physical inputs such as food, chemicals or gas, which make up a fifth of SMEs’ total expenditures, continued to fall, easing the cost pressure on UK SMEs. The fall has been driven by the weakening global commodities prices caused by slowing demand from emerging markets as well as developments on both the demand and the supply side of the oil market.
In addition, the number of business failures continues to decline with just 3,600 firms being liquidated in Q3, down from 4,100 at the same point in 2013.
Mark Stephens, Aldermore’s Deputy Chief Executive and Group Commercial Director, said: “While cost pressures have increased in the third quarter of 2014, cost inflation remains fairly low when considered in the long-term. With the exception of a few blips, cost has been following a downward trend for the past three years and is now less than a third of what it was back in Q3 2011. This is clearly good news for the UK SME community.
“Today’s SME Monitor report also shows that the number of SMEs going out of business continues to fall. In Q3 2014 the number of SMEs entering liquidation was 12 per cent lower than during the same period in 2013. It is clear that steady cost inflation, combined with a slow return to growth, has helped more SMEs stay in business.”
Danae Kyriakopoulou, Cebr Economist, commented:
“Costs for the UK’s SMEs continued to grow only slowly, helped by falling food and energy prices. Looking ahead weaker demand from emerging markets and an increase in the supply of oil and food are expected to keep commodity prices low in the near term. This should continue acting as a boost to UK SMEs and especially those that heavily use physical inputs.”
Please find Aldermore’s SME Monitor report here and an infographic here.
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Notes to Editors:
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