Protect your business from the cost of living crisis
The cost of living crisis is dominating the news agenda. The latest headlines – at the time of writing – announced new Office for National Statistics figures showing the UK economy unexpectedly shrank 0.3% in April 2022, while the Bank of England predicts a 10% inflation rate
As José Carvalho, head of consumer products at Barclaycard, surmised to the FT recently: “The cost of living squeeze is clearly influencing discretionary spending habits, with figures showing a decline in subscriptions, and a drop in spending at restaurants, bars, pubs and clubs.”
So how is this affecting UK businesses? Reading PayPal’s latest annual ‘Business of Change’ report does little to lift the spirits. It found that 78% of small firms cite the cost-of-living crisis as the biggest threat to their survival in the coming year.
Two-thirds of Britain’s small business owners told PayPal that the past two years have been the most challenging since they started their venture – and 47% fear the next 12 months could prove even more difficult.
So what can you do?
Can’t see the wood for the trees? Your accountant will be able to cast an objective eye on your operations, suggesting how you can make cost savings without impairing your ability to do business.
Raising your fees or prices.
Raising fees or prices could damage customer relationships so proceed with caution here, and talk it through with your accountant or a business rescue professional.
Talk to your suppliers.
As fellow business people, they will most likely be sympathetic and may have ideas on where you can save money.
Adopting a subscription-based payment model.
This will improve your ability to make accurate cash-flow forecasts , and help you get a better overview of where you are now.
Access any available government or local authority grants or business help schemes.
There’s a surprisingly large number of schemes out there. Make it a priority to find out about them.
Move to a remote working model, where possible.
This will save office costs – rent, heating and lighting, cleaning, etc.
Cut staff costs.
No one wants redundancies, but perhaps you can cut down the number of hours some staff are working, or introduce a three/four-day working week. It’s crucial here that you consult fully with your employees – you can’t make any changes to their contracts without them first agreeing.
By helping you to ‘unpack’ your business into the parts that are – and are not – working, our Kitchen Table Guide can help you face some of these tough decisions. You can download the guide here
Pressure on the government
The country’s biggest business group, the Confederation of British Industry (CBI), is calling for urgent action from the government. Without a fresh package of measures before the summer parliamentary recess to boost business confidence, a recession will be “a very live concern,” according to director general Tony Danker.
And Federation of Small Businesses (FSB) Chair Martin McTague said: “The cost of living crisis starts with a cost of doing business crisis. The prices that small firms pay for inputs are running well ahead of consumer prices – businesses are trying to absorb the difference, but many are being left with no choice but to pass costs on.”
He suggests cutting VAT to stimulate growth, helping firms with their energy bills, and the immediate allocation of unspent Covid-19 additional relief funding to firms most in need.
To speak to one of our business rescue and insolvency experts about how to help your business survive the cost of living crisis, call us on 01455 555 444 or email [email protected] and we can call you back.