SMEs reeling under high energy costs, says CBI |
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Mon, 13 Feb 2006 11:05
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LONDON: Small and medium-sized manufacturers in Britain are reeling under the pressure of high energy prices and even when their costs go up, weak consumer demands force them to cut down selling prices, according to the Confederation of British Industry's quarterly SME trends survey.
Steve Sharratt, chairman of the CBI's SME Council, said the high oil prices are hurting smaller manufacturers through increased energy and raw material costs. "The relative weakness of the domestic economy is undermining demand so business cannot pass on the increased costs in the form of higher prices to their customers," he said.
Nearly 39 per cent of employers surveyed said average unit costs rose quarter-on-quarter for the last three months of 2005, while 11 per cent reported a fall. The resulting balance of +28 is higher than the +23 balance for all manufacturers, said the report. This suggests smaller firms are affected more by higher oil prices than the bigger ones.
The CBI also said domestic orders fell in the last quarter, while prices also dropped, though medium-sized firms fared worse in this respect than small firms.
There has been a fall in export orders too, according to the CBI, though smaller firms cited high export prices.
The quarter, however, saw the total output volume remaining stable and the CBI does not expect this picture to change in the next three months.
Nearly three-fifths of firms are now working below capacity. Several companies, especially the medium-sized firms, have laid off staff to counter rising costs. The SME sector employs nearly 2.4 million people, 8 per cent of the total, and contributes around 200 billion pounds to the country's turnover.
The CBI has urged the Bank of England to respond to the calls for a cut in interest rates if there is no pick-up in the economy.
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