According to figures released by the ONS today, inflation in the UK is now at its highest level in 30 years at 5.4%. Inflation is predicted to continue to rise to 7% and potentially rise beyond this. Slower wage growth and rising prices have seen a strain on consumer and business finances alike. No one could have anticipated the restrictions on business activity running so deep and for so long. As a result, many business owners are becoming increasingly concerned when it comes to the viability of their business.

But what does rising inflation mean for your business?
  1. Rising costs

Global demand for materials, energy and transport have combined with supply issues to cause unprecedented shortages, delays and ultimately increased prices of materials. If your business is still recovering from the aftermath of the pandemic, these factors could cause a ‘perfect storm’ of reduced profits and reduced cash flow.

  1. Increased Wages

Taking into account inflation, average wages plunged in November 2021 for the first time since July 2020. Now, any significant increase in staff costs could push your business further into the red. Nonetheless, the redundancy rate in the UK has dropped to the lowest level on records dating back more than a quarter of a century, highlighting the demand for labour. The chancellor, Rishi Sunak, said the latest figures were “proof that the jobs market is thriving”. We’ll let you make your own conclusion…

  1. Increased Borrowing costs?

As mentioned above, inflation is at its highest level in 30 years, adding pressure for Central Banks to raise borrowing costs. The spectre of rising prices could lead to a cost-of-living squeeze even worse than experts have so far predicted. In a business sense, if you’re considering taking out a large business loan, ensure you take into account the large repayments…including interest.

Best practices:

If the above problems are temporary you could be able to plan ahead in order to boost cash flow through increased profits, lower overheads or a re-negotiation of debts.

However, if your business already had a ‘pre-existing financial condition’ prior to the pandemic or is having persistent cash flow issues, this could be a sign of deeper-rooted problems. These issues will worsen over the next few months and could leave your business in danger of entering insolvency.

Don’t let it get to that stage, know there is support available to ensure you’re protecting yourself & your assets.

If you are worried about this, get in contact with our expert team for pre-insolvency advice. You can call us on 0330 159 5820 or email [email protected].

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