There’s no denying that the impact of the cost of living crisis on businesses is a scary concept, whether you’re a high-flying high street brand, or a smaller local company trying to build your brand and keep your business afloat amongst rising energy bills and other financial challenges.
Recent research has shown that over two thirds of businesses are currently concerned about the Cost of Living Crisis, and the impact it may have on their trade.
However, making yourself aware about how the current crisis is affecting businesses like yours may help you to find solutions to rising costs, and enable you to save money and safeguard your long-term business strategy during this challenging time.
We’ve compiled a list of the most common ways the current circumstances are affecting businesses in the UK, how to beat the cost of living crisis, and what you can do if you find yourself in a difficult situation as a business owner.
How is the Cost of Living Crisis Affecting the Cost of Wages?
It’s a well known fact that low staff retention during a period of economic downturn is one of the first issues to be highlighted for small business owners.
With staff wages being one of the largest overheads in your professional pocket, rising living costs balanced against older wages can mean that employees may look to leave your employment to seek better paid work.
This can be due to the impact of rising utility bills, and the resulting need to safeguard personal household finances against high inflation and rising food prices.
Low staff retention can be costly for a small business, as recruitment processes can involve spending extra cash on training time and administrative tasks.
Recent reports have shown that two thirds of businesses are facing increased requests for pay rises from existing staff due to the current cost of living.
However, from a financial standpoint, it can also seem impossible to implement a pay rise for hardworking and loyal staff, especially when business costs are so high, and you may be losing customers due to the circumstances.
However, there may be other ways you can work on recognising staff for their hard work outside of a pay rise that will have minimal impact on your professional wallet. For example, you could award an extra allocation of annual leave for good service, or implement an early finish on a Friday afternoon (this may also help to keep running costs low if business is usually quiet at this time).
Cash Flow Problems for Small Startup Businesses
Many businesses may also be struggling with their cash flow, especially if you’re operating one of the 700,000 start ups that begin trading every year in the UK. Almost half of new businesses fold within the first year of trading, so keeping your own business thriving by maintaining a healthy cash flow during this worrying time is the key to your success.
You can achieve this by paying bills strategically, using a business credit card, and choosing the right payroll cycle are all good ways to manage a healthy cash flow in a productive way.
Rising Fuel Prices and Transportation Costs
At its peak, 2022 saw the biggest rise in fuel cost in July, and recent reports show that prices peaked at 48% higher than 2021. The average price of diesel in July 2022 was around 196p, compared to 121.8p in January 2021, with the average price per mile costing around 22p, making fuel costs one of the most expensive household outgoings.
In this perfect storm of circumstances, one of the primary threats to workers up and down the country, was the astronomical rise in fuel prices, particularly to those who would partake in hefty daily commutes, or needed to travel extensively as part of their employment.
Additionally, in other parts of the UK, where commuting by car in congestion zones is less common, and restrictive, making transportation costs through the likes of Central London expensive. As a result, many more rely on public transport like the Underground system, buses and cabs to get from A to B safely. Due to the rising costs to maintain and run these services, public transportation costs also rose to combat the loss of profit from the increased costs.
For example, in Central London, the average price of an Adult Travelcard shot up by around 3.8% in March 2022. and employees working in courier vehicles increased their fuel prices and consequently made less money.
Many commuters and travellers were stranded due to running out of fuel, and there were record length queues at fuel stations, as well as restrictions on volumes of fuel to be sold at any one time.
Rising Energy Prices and Energy Bills
Combined with the rising cost of fuel, one of the biggest concerns of the last financial year has been the rise of energy bills that hit an all time high in 2022.
According to UK government resources, the average energy prices for a household in the current climate increased by 54% in April 2022, with a plan to increase them by a further 80% in October 2022.
According to government figures, the average gas bill hike has increased by a whopping 141% from the winter of 2021, meaning that an increasing number of households are facing a rising cost in their day to day movements around the house, and are forced to cut appliance use to essential only.
Is There an Energy Relief System in Place for Businesses?
From October 2022, the UK government introduced the Energy Price Guarantee that has placed an energy price cap on the average price of household bills until 2024.
This price cap will help to mitigate the impact as prices continue to rise, and provide extra financial support for homes around the UK, and also covers out of contract rates.
However, this Energy Price Guarantee applies to household bills only, with a separate scheme for businesses.
The Energy Relief Scheme was created to assist businesses across the UK with record high energy prices by capping bills, which will help to manage your business bills, hopefully keeping your successful business thriving under rising prices.
How Has Inflation Impacted the Day to Day Cost of Running a Small Business?
Inflation is one of the biggest contributing factors of the current crisis, and many small business owners have felt the pinch since the beginning of 2022, and beyond.
According to data from the Bank of England, the inflation rate in the UK currently stands at 10.7% in January 2023, which is miles away from the target of 2%.
As a result, interest rates have soared in response, which has affected how much money small business owners can borrow for their start ups. You may need to speak to a financial advisor or your business bank before seriously considering any investments to your business.
This increase in interest rates ultimately means that the wholesale price of products has risen, meaning that small businesses in particular have to work harder to attract profits, and consumer spending has decreased in response to the higher prices of goods, and the need to save money to fund utilities and basic living costs.
To add to these circumstances, Russia invaded Ukraine on 24th February 2022 in a move that sent global inflation spiralling out of control. The war has only seemed to exacerbate the cost of living crisis, and the current cost of many global goods and services in supply chains.
Both countries are essential suppliers and manufacturers of materials like titanium, palladium, wheat and corn, so naturally, the current cost of these products is vastly inflated.
Additionally, due to the conflict, there are now higher costs associated with other goods from Europe. These include the prices of European gas, which have seen an average increase of 90% due to tight supply and mass demand, a 30% increase cost in oil prices for similar reasons, and a 17% increase in food cost in the past year.
What Can You Do About It All As a Business Owner?
Although the current cost of living crisis has paved the way for cash flow problems in businesses across the globe, many businesses are having to become savvy about finding solutions to financial problems, whether that includes finding a better deal through other sources and supply chains rather than their current supplier, or making cuts to their business expenditure.
Although many businesses are struggling under conditions that are proving harder to deal with, you might want to make one of you main concerns addressing one issue at a time, to reduce stress and enable the tackling of each problem in a thorough manner.
With the aftermath of a global pandemic still hanging around like a bad smell, in the next financial year, it’s likely that the situation will change again, and UK businesses will be faced with harder decisions to make with the current cost of maintaining a thriving company.
However, there are some things you, and other businesses can change that are within your power to do so.
Look After Your Mental Health
It may sound simplistic, but looking after your personal wellbeing will help you to cope if a crisis does occur. Many business owners suffer with insomnia in times of hardship, as well as an increased risk of anxiety and depression.
To combat this, it might be wise to commence in regular check ins with yourself, and recognise if you’re struggling.
If you do find yourself needing some help to get back on track, it might be worth speaking to your GP, and forging a plan to help you get through this tricky patch.
Be Realistic in Forecasting Cost for Your Business
Even when it’s slightly terrifying, confronting the bad news alongside the good will help you to retain some perspective over the progression (or regression) of your business.
If you’re struggling to keep the cogs turning in the right direction, never be afraid to look to the professionals for advice, whether that’s your accountant, business manager, energy provider or landlord.
If you find yourself in trouble financially, speaking to the organisations responsible for your debt will likely feel terrifying. However, speaking up is the best, and fastest way to resolve any problems, and will likely resolve the problem faster than burying your head in the sand.
Manage Your Money by Budgeting
Creating a budget for your monthly outgoings will help you to assess whether you can make any cuts to areas that you no longer need.
For example, you may be using a software subscription that you can either downgrade or cut out completely.
Additionally, you can make some changes to your working environment that will help you to cut energy costs. You could, for example, change your lighting system from manual light switches to automatic lighting, which would help you to reduce your energy costs, or install better insulation to keep offices warmer.
Pinch Your Household Outgoings
Although its easy to focus on your business outgoings most of the time, it may also be worth assessing your own personal expenditure and fuel cost.
By cutting your household outgoings, you can maximise on your personal savings if you need an emergency pot of funds.
To do this you could turn down your heating or change your lightbulbs to energy-efficient LEDs.
Pour All Your Efforts Into Marketing Your Business
Despite an impending recession, and economic difficulty for the UK, it’s important to acknowledge that you can still find business by doubling down on your marketing efforts, and finding a niche in the crisis to make your business an essential service for consumers.
To achieve this, you might want to invest in Digital Marketing Services to help to widen your reach towards other consumers online.
How Can Digital Marketing Help My Business in the Current Climate?
By using Digital Marketing, you can make targeted approaches to your ideal demographic, which will ultimately produce precise results for your business, and better information to tell you how to improve your customer service, and encourage returning customers.
As part of the Digital Marketing services offered by Maratopia, you can feel the full benefit of content services, benefitting from bespoke and skilfully written content for your website using carefully researched keywords. You can also gain an advantage over your competitors with link building using outreach, which will increase brand awareness of your business.
If you need to increase your exposure to customers with transactional intent, then Pay Per Click advertising can also help you do a hop, skip and leap over organically ranking Google search results, which places you in the initial eye line of your customers when they search for keywords relating to your business. This works wonderfully whether they’re intentionally looking for you, or are browsing to find the best deal.
If you want to find out more, contact us for a free SEO audit of your business’ website, or take a look at the full range of services we offer.
What Are My Next Steps in Knowing How to Survive the Cost of Living Crisis?
Wherever you’re at with your business in this current era of uncertainty, it’s important to understand that with preparation, time and patience, you can pull through, even with higher costs and economic variability.
The essential first step to success is making a plan of action with proposed solutions for each problem, which will allow you to deal with each issue in its entirety.
If you have a business partner, lean on each other for support and remember the importance of team work. Ensure to communicate through your decisions together as a team in order to manifest the best outcome for your business.
If you manage a business alone, you may want to seek professional advice to ensure you’re making the best decisions for the strength and longevity of your business.
Want to Work With Us?
If you want to find out how to utilise your business’ full potential through Digital Marketing, and boost your reach to customers, get in touch today for personal advice. We can help you to create a personal plan for the next chapter for your business today.
