Companies across the whole supply chain are watching their profit margins shrink in the face of rising energy costs, according to an IGD survey.

More than 98% of retailers, wholesalers and suppliers questioned for the research said they had been hit by significantly higher operational costs in the past 12 months linked to the rising price of energy.

Companies were experiencing big hikes in the cost of oil-based inputs such as vehicle fuel and plastics for packaging, in particular.

Asked to rate the impact of the higher costs on their business, wholesalers claimed to have been hit hardest, offering an average rating of 9 out of 10.

Retailers rated the impact of rising energy costs at 7.7 out of 10, with suppliers putting it at 7.2 out of 10.

Many companies reported a "tangible shift in business strategy" as a result of the higher energy costs, the report said.

More than 60% of companies surveyed said they were altering the frequency of deliveries to ensure vehicles were full.

Fifty four per cent said they were changing the quantity of products being ordered.

Just under 45% of respondents said that they had embarked on collaborative logistics practices with non competitors to save on fuel bills.

UK businesses were particularly vulnerable to any kind of price hikes, said the report, due to the fact that the country was already an expensive place in which to operate, with the cost of land, labour, regulatory compliance and taxes high.

The industry desperately needed to find new ways of reducing business costs in order to maintain margins and remain competitive.

Rising energy prices had also contributed to a significant increase in the cost of fitting out and opening new stores, the research showed, a fact confirmed by Dominic Perks, managing director of shop-fitting business Uno Retail Solutions.

"Companies are spending a huge amount more money per square metre than they were a year ago," he said.

"The cost of basic materials such as steel and oil have soared quite dramatically in the past 12 months, driving shop-fitting costs higher than they have ever been."