Retailers are warned to keep an eye on cash flow in the New Year as the cost of running a small shop is set to rise in 2010.

The latest Business Inflation Guide from insurance company More Than Business
showed that the cost of running a shop rose by 0.5% in the third quarter of 2009 and predicted that commodity price rises will push costs higher.

Fuel prices jumped by 3.42%, raw materials rose by 1.57% and labour costs increased by 0.22%. Gas prices did fall by 16.99%. Costs compared to the third quarter of 2008 were 1.7% lower due to deflation during the past 12 months.

More Than Business head of insurance Mike Bowman advised retailers to budget according for the increased costs.

“The predicted sharp rise in commodity prices as we go into next year is likely to raise the cost of running a small shop, perhaps more than market demand,” he said. “As a result, it’s important that small shop owners manage cash flow carefully as suppliers begin to push
prices up again as markets revive. Small shop owners with a heavy dependence on heating, lighting and fuel are expected to experience the sharpest rise in costs.”

Professor of Enterprise at Warwick Business School Stephen Roper, who also compiled the guide expects the rise to last until April. “We expect small business costs to rise sharply at least until Easter, when we predict prices will reach the same level as they were before
the recession,” said Roper.

“While costs are on the up, the disappearance of deflation means markets are strengthening and consumer spending is growing. This all suggests we are now beyond the crisis, but small shop owners must keep an eye on cash flow.”

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