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Raw material prices force SMEs to cut costs

The rising cost of raw materials has become a burden for small and medium-sized businesses in the UK, according to research carried out by commercial insurers NIG.

Over a quarter of businesses in the UK said they were forced to cut costs as a result of increasing prices, while 46% of large companies with more than £20m annual turnover said they were looking to offset raw material costs with cuts in other areas of their businesses.

Companies with the highest turnover expressed the most concern (46%) about rising raw material costs, while just 26% of firms that made between £250,000 and £1m turnover said it was a worry.

The figures released by NIG have also impacted on insurance levels, with 6% of UK businesses admitting they may not be adequately covered for theft, fire or flooding, because of the unexpected cost of replacing stock.

16% of UK SMEs said they would investigate different options for business processes or products to deal with the price of raw materials, while 24% of firms with over £20m turnover said they would consider a similar alteration.

Jon Greenwood, Managing Director at NIG, said: “UK businesses continue to face a very challenging economic environment and a key aspect of this for many firms has been the rising cost of the materials they use to build their products.

“The consequence is that adjustments are being made in other parts of their businesses to counter these cost pressures.”

Manufacturers have especially suffered, and 43% said they have considered bringing costs down, while 25% of retailers concurred with this plan.

Businesses in the North West have taken the hardest hit, as over half of firms said they had suffered as a result of rising prices.

In the Midlands, 20% said they were finding it hard to cope, while this rose to 28% in the South and 37% in the North, however in East Anglia, only 6% of companies reported a struggle.

This was posted in Bdaily's Members' News section by Miranda Dobson .