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The sustained high price of oil is forcing up costs for smaller manufacturers while their selling prices are held down by weak consumer demand, according to the CBI’s latest quarterly SME Trends Survey.
Thirty-nine per cent of employers said average unit costs rose quarter-on-quarter for the last three months of 2005 compared to only 11 per cent who reported a fall (a balance of plus 28 per cent).
At the same time domestic orders fell last quarter, indicated by a balance of minus 16 per cent, and prices dropped with medium-sized companies faring slightly worse (-7%) than small firms (-3%).
Overseas orders fell too (a balance of -8%) with high export prices cited as a restraining factor on orders by 65 per cent of smaller manufacturers, even though they have been consistently falling.
Steve Sharratt, chairman of the CBI’s SME Council, said: “Oil prices are still high and hurting smaller manufacturers through increased energy and raw material costs - and recent news stories suggest energy prices are set to rise even further.
“The Bank of England is understandably reluctant to alter interest rates until more data from the high street and wage settlements is available, but it must be prepared for a cut if there is no sign of a pick up in the economy.”
SME manufacturers directly account for 2.4m jobs in the UK - around eight per cent of total employment - and contribute £200 billion to UK turnover.
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