As we enter 2007 the industry is facing up to major increases in costs. One local baker recently told me that he was experiencing the biggest increases in raw material prices in living memory. His tale is typical.The immediate problem is the announcement by the major flour millers of the second substantial increase in prices since the early autumn 2006. British Baker has already covered this story in depth.It’s not just flour. The Minimum Wage has been another body blow to many in the Industry. The 6% increase last October has proved to be brutally expensive, ripping through companies’ wage differentials. The Low Pay Commission got its sums wrong. An increase at double the rate of inflation was unjustifiable. It is no surprise that the Bank of England is now battling inflation.Like everyone else bakers have also been faced with massive increases in energy costs. One of my smaller members told me: “The biggest killer for me in the last year has been the increase in energy costs. My costs for gas and electric in 2005 were approximately £7,000. Last year I shelled out over £17,000. I made savings in other areas of my business, but I’m still £10,000 worse off.”A price increase is painful. No-one likes it. However, bakery products remain outstandingly good value. In Scotland, baking remains a sector where small family businesses can succeed. They need to remain viable if consumers are to have the choice and quality they are looking for.