SCOTTISH BUSINESSES are suffering badly under the combined effects of higher fuel costs and weak consumer demand, the UK’s leading business organisation has warned.

The CBI said small to medium-sized companies appeared to be suffering more than bigger firms as the business sector faced the biggest squeeze between input and output prices for 30 years.

The results of the CBI’s UK-wide survey of small and medium sized companies (SMEs) prompted the organisation’s Scottish assistant director David Lonsdale to seek help from local authorities and the Scottish Executive in alleviating the worst effects of the “double whammy,” particularly where business rates are concerned.

He said, “It is crucial that the public sector plays its part in strengthening the competitiveness of Scots manufacturers by keeping a firm lid on those costs under its control which affect business.”

The severity of conditions facing businesses can be seen in the fact that 58% are operating below capacity and many, particular medium-sized companies employing between 200 and 500 people, have had to lay off staff. Just under 40% of those surveyed said average unit costs rose quarter-on-quarter for the last three months of 2005.