Costly time for UK companies

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Fuel costs are rising faster than inflation for more than half the companies in the UK and have rocked by double the inflation rate for almost one in four of them, according to research by the Royal Bank of Scotland.

Material costs are also outstripping the current five per cent rate for Consumer Prices Index inflation.

Peter Russell, head of the manufacturing sector within RBS’s Corporate and Institutional Banking department, said: “There is little or no respite from increased energy costs for many medium sized businesses.

“These are core costs which have a direct impact on price competitiveness. Whilst commodity prices have eased back of late, businesses remain focused on how to tackle mounting energy costs. In these difficult times, it is proving much harder to pass on these costs to their customers, leaving profit margins under significant pressure.”

Some of the lowest price increases have been in advertising and marketing and research and development, where costs are rising at around half the rate of CPI inflation.

The RBS survey found increased costs has led to an increased determination by firms to cut back.

But, whilst cutting costs was seen as the most important commercial priority for 2012, with two-thirds of businesses looking to cut back, only 14 per cent were planning to shed jobs.