Deflation hits British businesses

Date: 11th March 2009

British businesses have been rocked by news that running costs in the sector are now suffering from deflation.

Research by the insurer More Th>n Business found that costs fell by 2.9 per cent during the final quarter of the last year.

While the development may see fuel prices fall for haulage-based limited companies and business start-ups, it could pose a serious problem for other organisations.

According to the insurance firm, smaller companies with substantial assets tied up in investments and property will likely suffer, as deflation could cause them to shed significant value.

Mike Bowman, More Th>n Business, commented: "After a sustained period of rising inflation, small businesses now have to quickly adjust to this deflationary environment, with some benefiting more than others."

Regionally, areas in the north of England have seen the greatest rate of deflation, with an average of 3.8 per cent.

Data published by the Office for National Statistics earlier this week showed that British manufacturing output fell by about 12.8 per cent in January.