RISING commodity prices pushing up inflation is creating a challenging time for businesses, a report by Leeds, York and North Yorkshire Chamber has said.

In the chamber’s Quarterly Economic Survey, 65 per cent of businesses said they margins were being squeezed under the pressure of rising overhead costs and 53 per cent by the increase in cost of raw materials.

Business leaders said that in spite of growing cost pressures, some businesses are under pressure to maintain or decrease prices due to cheaper competitors entering their market, adding further strain to margins. As a result, 52 per cent said competition was more of a concern now compared to three months ago as a result of new entrants.

The survey showed 42 per cent of business’ domestic sales remained constant and 22 per cent decreased.

Businesses did say however that to respond to rising costs, they were investing in new tools, machinery and software to improve efficiency and boost productivity; marketing a competitive edge on quality to increase prices and recruiting graduates as a cost-effective source of labour.

Mark Goldstone, head of corporate relations at Leeds, York and North Yorkshire Chamber, said there was also a role to be played by Government in reducing cost for businesses in terms of red tape.

“The risk of inflation is further heightened by the weak economic recovery as businesses aren’t experiencing robust sales increases to offset the rising costs. Given the dangers facing the economy, we urge the MPC to maintain low interest rates until the recovery is more secure,” he said.