15/06/2010 - Firms boosted by low business costs
Lower borrowing charges have boosted firms by pushing business costs down by 0.5%, a new report has suggested.
The figure, which comprises all costs to industry including energy, goods, wages and the like, represents a fall in the year to May compared with the previous month, according to a price index worked out by the London Chamber of Commerce.
Businesses across the UK are taking advantage of borrowing costs which are much lower than a year ago, the chamber said, adding that the costs should remain low without another recession.
Erik Britton, Director of Fathom Financial Consulting, which helped with the research, said: "Variable cost inflation has picked up this year driven by larger bonus payments.
"Cheaper borrowing costs have allowed firms to keep total cost inflation close to zero, widening business margins.
"The risk is that activity will falter during the second half of the year, as the government takes steps to address the fiscal deficit, hitting company profits."
Director of policy at the London Chamber of Commerce Dr Helen Hill added: "Lower borrowing costs will only have a positive effect on the economy if businesses are confident enough to invest."
Copyright © Press Association 2010
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