Inflation and your business July 2023

Though inflation has dipped slightly, it won't feel like it to many small businesses, who are seriously struggling. In the past few years they've had lockdowns, supply chain issues, a shortage of staff and an unprecedented cost of living crisis thrown at them. Thanks to inflation, they've seen not only the cost of materials skyrocket, but any staff they employ demanding inflation-busting pay rises. Small business owners have coped with this in their usual way - working harder and going without a pay rise themselves. As a result, many of them are now the hardest working, lowest paid person in their company - a situation that cannot continue, especially with their own energy and mortgage bills also soaring.

For a robust and vibrant economy, the heartbeats are none other than small businesses. Yet, the devastating sight of familiar small businesses shutting their doors daily due to insurmountable obstacles is increasingly becoming commonplace. The government's handling of small and medium businesses leaves much to be desired. Rather than providing much-needed relief, they have deepened the plight of these businesses by elevating the level of corporation tax.

Inflation was one of the factors that led me to pivot completely and stop trading as a products-based business. I used my existing community to launch a podcast and change direction but it's a slow burn and money is very tight. High rates of inflation in a cost of living crisis meant consumer spending habits changed quickly and dramatically, and with Brexit complications on import creating further cost increases, it became unviable to continue with the other business, so I had to be agile and roll with the punches. Small businesses are vital to a thriving economy, and I see small businesses I know closing down every single day due to untenable circumstances. I believe the repercussions of this will be felt down the line in employment figures, innovation and the UK's trading power. The government should reduce taxation and increase access to funds for small businesses, while actively promoting entrepreneurship as a viable career path.

It's welcome to see inflation falling, but there's still a long way to go yet. As a finance company providing business loans and working capital support to SMEs, what we have noticed very definitively over the past 12 months is a serious tightening of cashflow within companies brought about by their invoices being paid late or in some cases not at all, which of course is a direct impact of inflation and interest rate rises. But many businesses leave it too late to admit to themselves there is an issue or one coming down the road and fail to act. The inflation sledgehammer sadly has some force left in it yet.

We have seen a consistent increase in service charges by suppliers, from food and drink to the coal that fuels our heritage railway. These charges can't be absorbed by the charity. Although customers are generally understanding, we are seeing that some of our products, where we generally had good footfall in the past, take a downward trend this year. The government needs to do more to support charities and small businesses. We need them to look at ways they can reduce energy costs, and VAT reductions (similar to the provisions put in place during Covid). If we can make any savings, then as a charity we can pass these back on to the paying customer. Our railway functions because of the support of volunteers and visitors. From families with little children to homeowners with mortgages and retirees looking for a day out. People have less disposable income and, as a result, are less likely to use limited funds on a destination day out.

Speaking daily with many landlords to set up our initiative to support independent pubs, the inflation impact on their business is hard to miss. The decrease in revenues caused by Londoners' budgeting less towards going out, added to the increase in costs, results in a serious challenge to keep the hospitality businesses running. Not to mention the massive staff shortage disruptions. Some pubs are finding it increasingly difficult to keep hold of staff because they no longer can afford to live in London anymore. These challenges, added to outstanding debts taken out during the pandemic and increasing business loan rates, make it hard for pubs to keep running. As a result, just this year, two of the ten pubs that took part in our initiative closed. This is heartbreaking news for the landlords who have put so much effort into making these pubs welcoming hubs for everyone, but also for the local communities who are left without a place to connect with others.