The latest results from the Aldermore SME Cost Inflation Index show that the inflationary slowdown seen over the past six quarters among and small and medium-sized UK enterprises came to an end in Q2 2013. Annual cost inflation rose to 1.1% from a previous reading of 1.0%, following more than a year of declines in the rate from a peak of 2.9% in Q3 2011.

 

A key driver of this latest inflationary uptick came from wage costs, as average total remuneration saw a sharp uptick in Q2 2013 compared to recent quarters, rising over the same time a year before by 1.9%.

 

However, downward inflationary effects came from financial service fees charged to UK SMEs, which fell back over the past year by 6.9% alongside tough conditions in the financial sector.

 

SMEs in the UK business services sector faced the sharpest annual cost increase, at 1.6% in Q2. Wage increases have a particularly strong effect in this sector, rising by more than elsewhere in the economy and making up a disproportionately large share of total costs.

 

Meanwhile, small and medium-sized UK manufacturers are facing the lowest cost inflation. The prices of raw physical inputs such as metals and chemicals and continues to fall back compared to a year before (by 0.7% and 1.7% respectively), while inflation in the cost of equipment has been slowing. Continued low cost inflation for SME manufacturers is good news for profitability in the overall sector, which has been hard hit by recent tough economic conditions, seeing year-on-year decline in turnover for much of 2013.

 

For more information and a full report, please refer to Aldermore’s website.

 

Note to editors: The Aldermore SME Cost Inflation Index is a composite measure constructed by Cebr from official data sources, including from the Office for National Statistics (ONS), the Labour Force Survey, the Bank of England and the Department for Business, Innovation and Skills, weighted together using an analysis of the ONS input-output framework for calculating the composition of the UK economy.