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Businesses could face some problems as a result of deflationary pressures, it is believed.

People tend to stop buying goods in a deflationary environment, says Danny Cox, chartered financial planner for Hargreaves Lansdown, which could put financial strain on companies finding it difficult to trade.

"Until prices stabilise people stop buying unless they absolutely have to," he adds, suggesting some may need to resort to debt management.

There is, however, some good news for businesses, the expert believes, as those which provide essential services are more likely to be able to ride out the economic downturn.

"If they have a market which is relatively deflation proof, then they should be able to continue trading and as their supply costs go down their profit margins should increase," Mr Cox continues.

Deflation began to hit small businesses at the end of 2008, according to the latest Business Inflation Guide.

Costs fell by an average of 2.9 per cent across the UK in the final quarter of the year, driven mainly by cheaper prices for fuel and raw materials, it also found.

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