Oil puts SMEs on the skids

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.

This balance is five points higher than for all manufacturers (+23%), suggesting smaller firms are being hurt more by higher oil prices, through energy and raw material costs, than bigger ones.

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.