Overall shop price inflation increased marginally to 2.5 per cent in April from 2.4 per cent in March. Food inflation increased to 4.7 per cent in April from 4.0 per cent in March. Non-food inflation slowed to 1.2 per cent in April from 1.5 per cent in March.

Stephen Robertson, British Retail Consortium director general, said: 
”Overall shop price inflation edged up slightly because rising food inflation outweighed slowing non-food inflation. Clothing, footwear and electricals prices were actually down on a year ago and, those prices fell faster than the previous month. In the face of falling consumer confidence, retailers’ efforts to generate sales with Easter discounts were key to holding back prices on non-food goods.

“But the upward pressures on food prices, which eased in March, bit back in April. The cost of world commodities, including sugar and wheat, rose even more quickly, inevitably working through to some shop prices. The consolation for customers is that there is a mass of offers to be had and the fact that forty per cent of the groceries being bought are on promotion shows that customers are taking up those offers in a big way.”

Mike Watkins, senior manager, retailer services, at Nielsen commented:
”With higher inflation likely to be with us for the near future, shoppers need to make the most of their more limited budgets and this will include looking for further savings when shopping. Supermarkets have responded by maintaining the highest-ever levels of promotional offers on groceries and non-food retailers are also delivering more price cuts and mid-season sales.”

 

Research by Aldermore, the new British bank, shows that small businesses worry that they will be hit hardest by inflation.

Aldermore explains that SMEs say they are increasingly concerned that their margins will be squeezed as the price they pay for goods rises without them being able to pass on those increases to their customers.

80% of SMEs surveyed said they were concerned that their suppliers were going to force above inflation cost increases on them. At the same time, only 45% of SMEs felt that they would be able to increase their own prices.

Comments Phillip Monks, CEO, of Aldermore: “Small businesses are worried that the lack of negotiating clout with both their suppliers and their customers means that they are going to come off worst from the current spate of inflation.”

“Big businesses with dominant market shares are going to find it easier to pass on price increases to their customers and wring concessions out of their smaller suppliers. Unfortunately many small businesses don’t have that kind of negotiating power.”

“Few businesses like inflation but small businesses probably least of all.”

Phillip Monks explains that small businesses have worked incredibly hard over the last year to repair and improve their margins so they will be particularly worried if the current levels of inflation do not fall.

Adds Phillip Monks: “Obviously these are not the inflation rates of the 1970s and 1980s but for some sectors, such as transport or food manufacturing, inflation is already causing serious problems.”

The FSB (Federation of Small Businesses) has been calling for the Government to put in place a fuel duty stabiliser, this would cut fuel duty when oil prices rise and increase fuel duty when prices fall. Increases in fuel prices are particularly significant as they can cascade through the economy.

Brent Crude futures recently broke through the $100 dollar a barrel level.

Research by Aldermore shows that small businesses worry that they will be hit hardest by inflation.

Aldermore explains that SMEs say they are increasingly concerned that their margins will be squeezed as the price they pay for goods rises without them being able to pass on those increases to their customers.

80 per cent of SMEs surveyed said they were concerned that their suppliers were going to force above inflation cost increases on them. At the same time, only 45 per cent of SMEs felt that they would be able to increase their own prices.

Phillip Monks, CEO, of Aldermore, said: “Small businesses are worried that the lack of negotiating clout with both their suppliers and their customers means that they are going to come off worst from the current spate of inflation.”

“Big businesses with dominant market shares are going to find it easier to pass on price increases to their customers and wring concessions out of their smaller suppliers. Unfortunately many small businesses don’t have that kind of negotiating power.

“Few businesses like inflation but small businesses probably least of all.”

Added Monks: “Obviously these are not the inflation rates of the 1970s and 1980s but for some sectors, such as transport or food manufacturing, inflation is already causing serious problems.”

The Federation of Small Businessesk has been calling for the Government to put in place a fuel duty stabiliser, this would cut fuel duty when oil prices rise and increase fuel duty when prices fall. Increases in fuel prices are particularly significant as they can cascade through the economy.

Brent Crude futures recently broke through the $100 dollar a barrel level.

Business confidence slipped last month, but is still at a sharply higher level than at this time last year, according to the latest Lloyds TSB Corporate Markets Business Barometer.

The survey – a monthly snapshot of company views on the outlook for the economy – shows that the number of firms claiming to be more optimistic about economic prospects fell in December. Just over half of businesses (52 per cent) said they were more upbeat than they were three months ago, and a fifth (19 per cent) said they were more pessimistic, resulting in a total balance of 33 per cent. Last month, by way of comparison, two thirds (67 per cent) were more optimistic and 16 per cent were more downbeat – a balance of 51 per cent.

Despite December’s fall, the overall balance of firms expecting economic conditions to improve remained at a much higher level than at the end of 2008 and is far above the long run average balance for the survey of seven per cent.

Confidence levels do vary across the sectors. The balance of distribution firms reporting rising optimism rose ten per cent, to 38 per cent, while the balance for services businesses fell 13 per cent to 50 per cent. For industrial companies there was a slump of 55 per cent to zero, despite a more favourable exchange rate for exporters. However, in each case, the levels of optimism were much stronger than 12 months ago.

The picture is similarly varied across the regions. In the South, the balance of firms reporting growing confidence in the economic outlook slipped one per cent, while in the North and Midlands there were respective falls of 35 per cent and 26 per cent. Again, despite this month’s decline in confidence, overall optimism remains much higher in each region than at this time last year.

Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: “Although confidence levels fell back at the end of the year, the context here is critical. Across the board, businesses are now far more optimistic about the economic outlook that than they were twelve months earlier.

“The fact that confidence is not on a smooth upward path is another reminder that the pace of recovery may be gradual and uneven, but it is clear that overall optimism amongst firms is still growing.”

Two thirds of small business owners believe that inflation will either flatten out or decrease over the year, resulting in a period of deflation, according to research from Bank of Scotland.

The spectre of deflation does not appear to spell out bad news for all SMEs as one quarter (26 per cent) of small business owners would view such a period as a positive stimulus for their businesses.

Such a stimulus could come in the form of lower running costs. More than half (53 per cent) of small business owners think that the costs of running a business will remain flat (41 per cent) or possibly lower (12 per cent) over the course of the year in comparison to 2008.

With operational costs remaining relatively flat, the majority (53 per cent) of small business owners expect to freeze prices for their customers during 2009 although one in eight (13 per cent) expect to buck the trend and hike their prices by more than 5 per cent.

The customer is king

The research by Bank of Scotland reveals that small business owners are increasingly being driven by customers to push prices lower in recognition of tougher market conditions:

• Nearly eight in ten (79 per cent) believe that that are operating in a tough market, where customers are looking to drive down prices and get the same for less.
• Seven in ten (71 per cent) believe that customers buying in bulk are pushing for discounts.
• Six in ten (61 per cent) believe that customers are increasingly looking to dictate prices, telling them what they are willing to pay for goods and services.

Business running costs

When it comes to their own business running costs, SME owners present a mixed picture in terms of whether they believe costs will go up or down:

Despite the Government’s pledge to postpone the proposed increase in small company tax, nearly four in ten (37 per cent) under the impression that rates of tax will still increase this year.

In line with the downward trend in both commercial and residential property prices, seven in ten (68 per cent) expect commercial property prices to continue falling.

Eight in ten (80 per cent) expect to either hold salaries at the same level (67 per cent) or even decrease them (13 per cent) over the year.

Other overheads are expected to become less expensive, with four in ten (41 per cent) expecting office equipment costs to decrease.

Donald Kerr, commercial banking director, Bank of Scotland said: “Contrary to the trend in recent years, small business owners are now anticipating level or even possibly lower running costs over the coming year. However, against a background of difficult trading conditions, the majority of companies are now being pushed by their customers to reflect these lower costs in lower pricing. Small business owners will clearly have to demonstrate some acute financial acumen in order to balance the need to maintain margins whilst keeping product and service pricing in line with demand.”