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As the manufacturing industry is hit by an inflation rate, which is 60 percent more than the rate of consumer inflation, business costs soar to a new high. Recent research reveals that small manufacturing businesses in the UK are at risk of being priced out of the domestic markets.

The latest Business Inflation Guide, which is produced quarterly from More Th>n Business indicates that UK small manufacturing companies are contending with an annual inflation rate of 8.3 percent, which is 60 percent than the rate of inflation for consumers. Inflation is thought to be rising as a result of rising costs of raw materials and decreased demand. Although costs of raw materials steadied in the summer, they were still 17.5 percent higher in September this year than September 2010. Rising energy prices have also contributed to the increased costs.

According to figure released by the Office of National Statistics recently, manufacturing output has dropped by more than expected which is thought to be due to rising costs and low consumer demand. As demand drops, it makes it harder to pass on increased costs to consumers.

The annual inflation rate for small businesses from all business sectors has risen to 6.9 percent, a record high. The managing director of More Th>n, Mark Christer said:

“2011 has been a highly challenging and unpredictable year for small businesses, with consistently high inflation impacting both overheads and the level of demand for products and services. As profit margins are squeezed, maintaining cashflow is of utmost importance and sound contingency plans are essential to cope with market lulls and price fluctuations.”

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