Inflation July 22

Whilst we seem to have become accustomed to the news of inflation rising month on month, more and more businesses are feeling the strain and are struggling to make ends meet. When inflation hit 9.1%, one in ten businesses we spoke to told us that they were unable to meet their financial commitments and a further one in five were struggling to remain competitive without rising their own costs. These were alarming statistics at the time, and it's unsettling to consider how this will deteriorate if the Government doesn't intervene soon and provide businesses breathing room to regain financial control. Encouraging firms to reduce their prices fails to tackle the root of the issue. Businesses simply don’t have the financial capacity to absorb their rising costs, and without proper and viable support their overheads will be squeezed ever tighter. Not only will they struggle to keep up with operational costs such as paying their employees or suppliers, and buying stock or materials, but some sadly just won’t survive.

As a mortgage broker, I'm seeing a lot more inflation-fuelled anxiety and uncertainty from people when they're looking for a house. They're unsure about how to budget and find it difficult to predict how much all their bills will be in a new home, and that's before a massive hike in their expected mortgage payments. With the stockpile of houses reduced, this is affecting cash flow with my business so we're looking at other ways to adapt but ultimately the cost to the consumer will increase. No doubt, we'll see small companies leave the industry who cannot keep up and consumers will move towards the large conglomerates who can absorb the higher costs, which ultimately reduces competition. And why is the Bank of England increasing rates? It's simply adding more fuel to the fire. It's a supply problem throughout the world, not a result of the spare disposable income people have. People on low incomes are being hit for six and getting themselves further into poverty. But don't worry Sunak will save the day! He's done a superb job so far, right? We need some business-minded, economically educated leaders working out the right response.

Further substantial rate rises from the Bank of England seem inevitable. The Fed's aggressive monetary tightening, with possibly a 1% interest hike very soon, is pumping the Dollar to new heights against a basket of currencies. It reached parity with the Euro last week, and Sterling is sharply lower against the greenback as well. All of which makes dollar-denominated commodities and goods, like oil, more expensive to import into the UK, further piling on the inflation misery. So I don't think the Bank of England can afford not to increase rates. I think Rishi Sunak as Chancellor did some good things, but he's lost the plot with all the tax and NI hikes. Increased productivity and investment in growth industries are the way out of the hole we're in, not taxing everyone until the pips squeak.

I have been very fortunate to secure a new full time job, meaning that I can perhaps continue to run my business as a hobby, but at least keep it afloat. Our current Government's politicians are too busy squabbling over the top job right now, and seem blithely ignorant of how ridiculous it is for any one of them to accuse another of being "out of touch" with the people of the UK. They ALL are, and the naked greed and utter lack of self-awareness on display is quite repugnant. It would be funny if it weren't impacting the rest of us so much. This situation was always going to come about, the pandemic just brought the timetable forward. At a time when we should be working with our European partners, we are cut off and cut out.

Inflation has hit our small accountancy practice, from the small things like our landlord hiking our energy bill quickly, which wasn’t in our cashflow forecast, or the reams of paper we go through that have doubled in price. For the first time in our 6-year operating history Ascentant passed on a modest 4% price increase to our clients recently. We didn’t want to, it was a case of having to and we assessed the risk of losing clients and did actually lose one, which was far from ideal. Some of the things we do regularly as a team have been reduced, like our team lunch and learns (because pizza deals are few and far between nowadays meaning a £80 bill is a bit much every week alongside all the other benefits we provide staff). Some of the initiatives like the employment allowance increasing in the last Budget has been helpful, as has the employee NIC but it’s been completely eaten up by the cost of diesel and petrol for travelling to work, increase in food prices and of course home energy bill increases. So our staff were given with one hand but taken away with the huge inflation prices and it’s all totally outside of our control. It’s interesting hearing the diverse ways of approaching taxes from the Tory leadership contenders. Knowing who would be the right PM for the average small business is so hard to judge. The sooner we have one, the better, though, as business shouldn't be without a figurehead this long.

Our second-hand kids' clothes business is being hit hard at the moment. Sales are down around 25% on our usual figures, which we can only attribute to the cost of living crisis. Our customers are families with young children, and they are the ones who are being squeezed from every angle with the huge increases in fuel, energy and food costs - and they are now facing the extra costs of entertaining their children over the six week summer holidays, too. We sell children's clothes, which you'd think would be an essential item rather than a luxury, and ours are second-hand too, so they're cheaper than the high street. We thought this would make us quite resilient to a spending downturn. But some of our customers are telling us they're having to make do with what they have, and only buy the minimum when it comes to new clothes, because they're so worried about all the other bills coming in, and we're definitely seeing that reflected in our sales. As a business, this is turning out to be the most difficult period we've experienced in four years. The pandemic was really good for us as an online business. We expanded our staff and premises as a result of strong growth over the past two years but this downturn in consumer spending is quite worrying. We're also of course facing our own increases in costs of energy, postage and stationery etc. We gave our staff a small pay rise in April to try and help them cover increased costs. We don't want to pass on increased costs to our customers when they're already struggling, so instead we're just trying to tighten our belts as much as we can, and we have had to put on hold plans of expansion and hiring of new staff for now. There definitely needs to be more help for struggling families with young children, the Government is doing nowhere near enough to help with rising costs. I'd also like to see some help for small businesses too. We provide jobs for six staff and pay taxes, and we'd like to be able to continue doing that, but there doesn't seem to be any help on the horizon for the difficulties we're facing.