How the current cost of living crisis is affecting businesses
It’s not surprising to hear that the past few years have proven to be difficult for many businesses across the country. With a global pandemic, rising living costs and considerable spikes in inflation, many business owners across the UK have shown significant resilience to ensure their business survives.
Research has been conducted, and the statistics show that three-quarters of business owners are concerned that the current cost of living crisis will affect their business. A quarter stated that they predict their business may not survive to see the next financial year if the prices continue to increase.
With prices increasing, this affects the consumer’s buying behaviours as nearly two-thirds of business owners explained that their customers would no longer be able to afford their products/services and potentially lose them.
The leading causes of concern for business owners are:
- Cost of fuel
- Cost of Energy
- Cash flow
- Employee retention
- Transportation costs
Let’s go into detail about each cause of concern.
Cost of Fuel
One of the biggest concerns for everyone at the moment is fuel cost. For business owners, the soaring fuel prices will affect them directly and indirectly.
Businesses that have to factor in delivery and transportation for their business to run will be directly impacted. However, other businesses can and will still be affected by the increase in fuel prices, as this can affect the day-to-day movements of employees and the external use of supply chains.
Cost of Energy
Another main concern for everyone is the increased cost of energy. Nearly 40% of business owners are stating that this is one of the primary threats to their business’s stability this year. According to recent reports, Small/Medium business owners have faced an average gas bill hike of 250% in the last year! Another aspect to consider is that, unlike the domestic customer, businesses have not been covered by the energy price cap. Hopefully, this will change soon, and there won’t be the fear of businesses’ energy bills rising throughout the year.
Maintaining a healthy cash flow is essential to running a successful business; however, this is proving harder than ever for many businesses. Start-ups and small/medium businesses that do not have a huge cash reserve to support them will feel the impact of not having a healthy cash flow when faced with higher costs and the potential of losing customers.
Business owners expressed that one of their main concerns was employee retention. A recent report showed that in the last quarter of 2021, 337,000 people handed in their notice and resigned. 26,000 left for personal reasons, and the majority stated ‘Other’. This is a high record for people moving jobs.
According to TEG Road Transport Price Index, the average price-per-mile for haulage and courier vehicles increased from 101.5 points to 116.8 points between January 2021 and January 2022. This is a 15% increase year on year. This is a big concern for business owners if they use transportation to keep their business running.
Cause of inflation
The current conflict between Russia and Ukraine has disrupted exports from the region for commodities like metal, food, oil and gas. The increase in inflation levels is something that hasn’t been seen in decades.
Ukraine and Russia are both important suppliers of energy and agricultural products. The effects of the war-damaged production facilities resulted in many core products rising in price as they are difficult to substitute, e.g. wheat, fertilisers, gas etc.
How inflation is affecting Masters
As we have mentioned before, inflation in the supply chain can cause a ripple effect on prices. This can cause supply chain costs to rise, which causes more inflation and an increase in prices. Here at Masters, we consistently review costs so we can continue delivering a quality service to our loyal customer base. We continually review the fuel surcharge and always look to reduce this when the fuel prices drop.
If you have any questions about our logistics services, particularly 3PL, please contact our Logistics team on 01353 648222.