Small businesses predicted deflation annoucement

This week’s announcement that Britain is staring into the abyss of deflation comes as no surprise to small businesses.

A recent survey by the Bank of Scotland found that two thirds (66%) of small businesses expected inflation to ‘decrease’ or ‘flatten out’ over the course of 2009.

However, the outlook of small businesses is not completely gloomy, with some experiencing deflation as a positive.

A quarter (26%) of SME’s polled said deflation would act as a positive stimulus for their business.

More than half (53%) expect the cost of running a business to remain flat (41%) or fall (12%) in comparison to 2008.

A similar number (53%) expect to freeze prices for the customers during 2009, although one in seven (13%) plan to increase their prices by more than 5%.

Donald Kerr, Bank of Scotland’s commercial banking director, said: “Contrary to the trend in recent years, small business owners are now anticipating level or even possibly lower running costs over the coming year.

“However, against a background of difficult trading conditions, the majority of companies are now being pushed by their customers to reflect these lower costs in lower pricing.

“Small business owners will clearly have to demonstrate some acute financial acumen in order to balance the need to maintain margins whilst keeping product and service pricing in line with demand.”

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