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SMEs hit by inflation 'double whammy'

Published On 26 January 2007 at 09:37:29

Rising inflation is exacerbating financial problems for many SMEs, experts warn.

Higher energy prices are increasing costs for SMEs and also having a knock-on effect on interest rates.

The latest figures show that annual inflation has now reached three per cent, forcing the Bank of England to order its third rate hike in five months, with the base rate now standing at 5.25 per cent.

Rising oil and gas prices have resulted in larger utility bills and increased transport costs.

Essentials like office furniture and computers have also become more expensive, exacerbating the pressures on small businesses.

Ireland is also suffering from high inflation and the problems seen over there are set to be mirrored in Britain.

Mark Fielding, chief executive of the Irish Small and Medium Enterprise Organisation, said: "Inflation is spiralling out of control and if allowed to continue will do untold damage to the small business sector in terms of investment and jobs."

There are now concerns that if the bank's actions fail to curb inflation, SMEs will be hit both by continually rising prices and fresh interest rate hikes.

Online credit checking firm e-bcm predicts that more small businesses than usual will go out of business this year following interest rise.

 

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