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Tough Times Ahead

  • Post category:General

Despite our best efforts to start the year with a positive mindset, the reality is that we are in for a tough year. Travel is back on the agenda but how many people will be able to afford their weekly shop, let alone a foreign holiday this year?

Soaring inflation has caused the Bank of England to raise rates again and whilst they remain historically low the fact is that borrowing costs are on the rise along with all other cost headings. Horror headlines abound about the impact on household incomes these cost increases will have but there is less comment on the impact on businesses.

Inevitably household discretionary spend will be hit which will impact the retail, leisure and hospitality businesses, just as they are trying to recover from the lockdowns.

But it is not just those sectors that will suffer – rising borrowing and energy costs will hit all businesses, as will the increased costs of raw materials and/or stock. With the increasing pressure on household incomes we expect to see increasing pressure for a rise in salaries which will add further to the business woes.

The obvious thing to do when faced with increasing costs in a business is to raise prices in order to maintain margins but the harsh reality is that consumers are either going to push back from paying extra or simply be unable to do so, meaning increasing pressure on margins – something that never ends well.

It is great news that we are moving on from Covid but we are by no means out of the woods when it comes to the economy.

If any of our contacts are involved with, or knows of anybody whose business is struggling, we would urge them to act decisively and seek independent professional advice and that is why we are always available for an initial zero cost assessment which can be arranged by contacting Alistair Dickson at our member firm SKSi.