There’s no getting away from the uncertainty surrounding the cost-of-living crisis. Whilst people are already feeling the effects of rising prices, it’s only predicted to be even more challenging over the coming months.

The news of soaring energy prices is enough to ignite feelings of worry in the most financially savvy amongst us, but what does it mean for small businesses across the UK?

What is the cost of living crisis?

Put simply, the cost-of-living crisis is a term used to describe the situation where the cost of everyday essentials (bills, food, etc), increases faster than household incomes. Unfortunately, this results in households having to make difficult decisions and cuts to limit their spending.

What has caused the cost of living crisis?

  • Inflation: Inflation in the U.K rose to 9.4% in June, which is the highest it’s been in 40 years. This means that an item that cost £1 last year would cost around £1.09 this year, and if an item cost £10 last year, you’d be looking at paying £10.94 for it this year. More worryingly, experts predict that inflation in the UK will rise to more than 13% by the end of the year.
     
  • Supply issues and shortages: This is a lingering problem from the pandemic. A reduction in shipping capacity and a drastic increase in shipping costs means it’s much harder for businesses to get hold of goods. This means the price goes up as suppliers know their product is in demand and people need it.
     
  • The energy crisis: The demand for oil and gas has increased (mostly due to countries coming out of lockdowns), which has caused prices to rocket. This means that increasing prices for energy companies has led to increasing prices for consumers and businesses.

    What does the cost of living crisis mean for UK business?

    • Increased overhead: Businesses will have to contend with the same soaring energy prices that their customers face.
       
    • Customers looking for cheaper alternatives: With more than a third of consumers saying they’ve already switched to cheaper alternatives, businesses will have to compete with a change in consumer spending habits and priorities.
       
    • Increased spend on wages: Businesses might also feel the strain as staff shortages and a saturated job market might result in them having to increase their spend on wages.

What funding is available for businesses throughout the cost of living crisis?

  • Employment allowance increase: In April the government announced the employment allowance would increase to £5,000 (it was previously set at £4,000) in an attempt to combat rising inflation.  This means that certain businesses and charities will be able to claim a bigger reduction on their secondary Class 1 National Insurance liabilities and, from the 2023 to 2024 tax year onwards, their Health and Social Care Levy liabilities too.
  • Search resources by location/industry: There is also a range of financial support available for businesses across the country. Visit the business finance and support page to see what funding and grants are currently available to you.

What steps can I take to ensure my business stays profitable?

Whilst there is no one-size-fits-all solution for weathering the cost-of-living crisis, there are some steps you can take to ensure your business is well placed to do so.

This week, LOCALiQ – part of the publisher Newsquest Media Group – published an article featuring strategies businesses could use to remain profitable during the cost-of-living crisis. The article features tips to consider when cutting down expenses, determining what products to focus on, increasing prices, how to optimise your marketing activity, and more.

To read the full article click here.

Your Money Matters

Your Money Matters is a campaign launched by us and our sister titles across Newsquest to help you overcome the surge in the cost of living. This year has seen a whole host of household price increases — from the energy price cap rise to surging inflation and food prices — costing your family hundreds or even thousands of pounds extra per year. We’re making it our mission to look out for your cash, offering money-saving deals, competitions, giveaways and insightful stories from your community on the impact this cost-of-living crisis is having on our readers. The worldwide energy crisis exacerbated by the Ukraine invasion, the financial impact of the Covid pandemic, record inflation figures and a surge in the cost of goods, fuel and travel means we will all feel the pinch. Through our newspaper, we want to do what we can to help make your cash go further because we know your money matters.