Inflation can make life much more difficult for small businesses. When the price of goods and services rises, it can stretch budgets and revenue to their limits. But with the news that inflation is hitting the UK in 2022, can small businesses cope with this rise?
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Current state of UK inflation
The current state of UK inflation is alarming – it’s rising at its highest rate in 30 years, with fuel, energy and food flying up. Indeed, in the 12 months to February, prices rose 6.2 per cent on average. And with wages not keeping up with the rate of inflation, consumers will have far less disposable income to spend. This situation has been caused by a few factors: the economy was already precariously recovering from the pandemic, but Russia’s invasion of Ukraine – and the subsequent sanctions placed on Russia – has damaged supply chains for many key resources, forcing prices up.
How inflation threatens small businesses
Inflation makes life difficult for small businesses. For a start, suppliers will be forced to charge more for the resources and goods they sell to small businesses. This can, in turn, force the prices of small business services up, reducing sales. Beyond this, life is getting more difficult for small businesses as shipping costs rise. This can make it even more costly to bring in the resources to build products. Plus, with energy costs rising for everyone, overhead expenses will surge too. Essentially, inflation threatens small businesses by increasing operating expenses while damaging sales figures.
How to protect your small business against inflation
There are ways you can protect your business against inflation though. For a start, one way to lower your energy costs is by lowering your energy consumption. Small adjustments add up: turn off equipment when it’s not in use, switch lights off when they’re not in use and encourage employees to enjoy working from home where possible. Another option is to check to see whether you’re being charged accurately for your energy use. Analyse the energy readings from your office or premises and make sure they correlate with your energy bill. If you’re dissatisfied with your provider, you could consider shopping around for a new energy tariff. Switching to a renewable energy provider could pay off in the long term, for instance.
Ultimately, even if you take the best precautions to protect your small business against inflation, turbulent economic and political conditions can put you under immense pressure. In this situation, it can be worth working with insolvency and restructuring consultants to help retrieve a valuable, healthy company. Either way, the path to protecting your business starts by carefully following the advice above.