According to the latest Business Inflation Guide (BIG) from More Than Business, small business contractors experienced a 4.5% fall in costs during Q4 2008, the first entrance into negative growth territory in recent years.

During Q4, cost decreases for small contractors declined 1.6% more than the rest of the UK, which has a national average of 2.9%.

The BIG has revealed that the decrease is due to a sharp fall in fuel prices, down 18.3%, and raw material costs, down by 11.95%.

More Than Business has warned although these figures may seem like good news for smaller contracting firms, they indicate the markets are slack and that people aren't spending.

The BIG, developed in conjunction with Warwick Business School, is a quarterly index that measures a basket of 20 of the most important expenditure items for small businesses.

Mike Bowman, head of More Than Business, said: “After a sustained period of rising inflation, contractors now have to quickly adjust to this deflationary environment, with some benefiting more than others. Deflation will come as good news for transport and haulage contractors as they will see fuel costs come down due to a sharp fall in oil prices. However, deflation is bad news for businesses that have large amounts of stock already purchased, as it will be losing value day by day.”

Sectorial breakdown (% reduction in small business costs)

  • Contractors -4.5%
  • Manufacturing -4.3%
  • Small shops (retail) -3.4%
  • Private Services -2.6%
  • Homeworkers -1.7%

Overall in 2008 small business contractors saw a 3% cost inflation on the previous year, below the national average.

To view the Business Inflation Guide visit www.morethanbusiness.com/BIG