Cost of living crisis – the effect on businesses

Anyone with half an eye on the press, or their finances, over the past few months will have read all about rising inflation and specifically, increasing energy bills.  But whilst a lot of media attention has been, perhaps rightly, about how this will impact individual households, inflation can also have a big negative impact on SMEs.

Increased costs

The UK’s inflation rate hit a 30-year high this year. The Bank of England expects the rate of inflation in the UK to reach above 7% by Spring 2022. Then begin to fall back in the latter half of 2022 and through until 2023 (hopefully).

Energy regulator Ofgem announced energy bills will rise by £693 (or 54%) for 22 million people in April 2022. This is mainly due to the global increase in demand for oil and gas. Thus increasing their wholesale prices and inevitably, causing energy providers to step up their prices.

Furthermore, the government has announced a 1.25% increase in National Insurance in an attempt to fund the NHS during this pandemic crisis. Undoubtedly, further worsening the rising living costs and inflation rate for many.

Reduced Margins

For businesses, it’s fairly clear that operational costs are going to be going up. So to retain profit margins they will have to try to increase sale prices which can a) be difficult and b) have a time lag which impacts cash flow significantly.

Couple this squeeze with the fact that many employers are finding it difficult to find and retain staff amidst the living costs and inflation crisis, it could provide something of a perfect storm. Due to rising costs and national insurance, employees have no choice but to ask for a higher wage, or go elsewhere that is able to offer them a higher paycheck. On the flip side, employers, also hit with increased costs left and right, might find themselves in a tricky situation where they would have to let go of staff due to insufficient resources or inability to give a pay rise. Undoubtedly, small businesses will be affected the most compared to more established companies.

What can I do about it?

At FD Business Rescue we certainly don’t have a magic solution.  But what we can do is help SMEs navigate this storm in order to come out the other side, whether in weeks, months or years, with both business and personal finances in as good a shape as possible.  We regularly advise businesses not just looking for urgent help to survive, but also those who are simply facing cash flow issues or financial pinch-points.  The key is to get in touch with us early – even if you don’t need help right now, if we have an initial conversation we may be able to provide some (free!) tips.  Plus we’ll then be on-hand if you do need further assistance down the line.

Our team of experts are on-hand to speak to you today.  So please get in touch and we will be happy to arrange a call with you.

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5 ways to rescue your business

If you require help, get in touch or download our FREE guide with some top-tips you may not have considered.

Download our free guide to see 5 ways to rescue your business that you didn't realise were an option

If you require help, get in touch or download our FREE guide with some top-tips you may not have considered.