Editor's view: Watch out Gordon, SMEs are pumped!

Rocketing oil prices have caused a major stir among small businesses, but a pending increase in fuel duty is proving far more incendiary.

Crude oil prices actually fell in the immediate aftermath of the second Iraq war, but since then the increasingly obvious problems facing coalition troops have caused them to rise again - to record highs.

Uncertainty over the course of Iraq's occupation, coupled with political turmoil in Saudi Arabia, means that the problem is not necessarily short-term. Some commentators are warning of further increases over the next couple of weeks and that high prices could be maintained throughout the summer.

Of course, this in itself is bad news for the economies of the UK and US. Having only just pulled out of the last global downturn, both are facing the uncomfortable possibility of another one just around the corner.

A spike in oil prices preceded all of the last three global recessions, and while another major downturn is unlikely this time - partly because interest rates are already low - there will nevertheless be an impact on growth.

The signs are already there for everyone to see. Airfares are on increase, ditto petrol prices - which have passed 80p a litre for the first time since 2000, and now truckers are beginning make protest noises.

The Road Haulage Association (RHA) and the Freight Transport Association, together representing 90% of the UK's freight carriers, said that unless petrol prices eased, the government could face protests like those which brought the country to a standstill in the summer of 2000.

North of the border, Scottish truckers are "suffering like never before", according to a statement released by the RHA on Thursday, and many are gearing up for strike action.

"The members within my region are suffering like never before," said RHA Scotland and Northern Ireland director, Phil Flanders. "Operators are now working to the tightest possible margins; making even a small profit on a job will soon be a thing of the past."

But the problem is set to get a whole lot worse. In this year's Budget, Gordon Brown announced that fuel duty would rise by 1.9p per litre of petrol, a big increase when applied to a full tank.

The rise, which was postponed until September, would mean British haulage businesses paying three times more for fuel than their counterparts across the Atlantic. Unsurprisingly, businesses are calling on Brown to forget the increase.

And, as usual, SME groups say it is small businesses that stand to lose the most. According to the Forum of Private Business (FPB) this week, price increases at the pumps will "prove damaging for many of the UK's SMEs".

Almost 80% of the FPB's members supported the fuel protest of 2000, despite the disruption caused, and the organisation believes similar disputes are on the cards unless the situation changes.

"The last thing that we want to see is a repeat of such disruption and if Gordon Brown committed to at least review the September 1 increase it would send a message to UK businesses that he is aware of the strength of feeling in the country," said FPB head of research Andy Mowlah.

Meanwhile, Ray Holloway, director of the Petrol Retailers Association and a prominent face in the 2000 protests, believes that renewed strikes and blockades are inevitable if prices stay high and Brown maintains his course on fuel duty.

He said: "We already pay a high price at the pump and Gordon Brown will surely come under pressure to not increase the duty paid. He must consider whether UK businesses can cope with the type of disruption caused by further protests."

If the gloomier of analysts' predictions come true, and oil prices remain at or around current levels for the whole of the summer and beyond, then the chancellor will be in for a rough ride come September.

With fuel dependent businesses already losing out to companies in Europe and the US on petrol prices, something is bound to snap and a repeat of the 2000 protests would be a near-certainty.

In this eventuality, the protesters know they can count on the support of a large majority of small businesses.