The cost of running a small shop has fallen, but retailers remain under pressure as a result of low demand for goods.

This is the conclusion of the latest Business Inflation Guide from More Than Business, which estimated the cost of running

a small shop fell 1.1% over the first quarter. Costs for the overall UK small business community fell 1.4%.

The fall in overheads could be put down to declining labour, advertising, vehicle and raw material costs, said Mike Bowman, head of More Than Business. "The fact that we're experiencing such substantial deflationary conditions demonstrates just how deep the recession has become in the UK," he said, adding that the unstable economy was making it hard for retailers to make important decisions.

"The volatility has made it very difficult for retailers to plan and invest, placing tremendous pressure on cashflows and managing stock levels. There are a lot of small shop owners who have never experienced anything like this before."

Costs could soon be about to rise again, added Stephen Roper, and professor of enterprise at the Centre for Small and Medium Sized Enterprises at Warwick Business School and co-author of the guide.

"It is genuinely hard to predict which way the small business economy will move over the next year," he said. "I doubt we will get back to very sharp inflation, but I suspect we will move closer to cost stability next quarter."