The cost of doing business crisis

There is a great amount of talk in the media regarding the ongoing costs of living crises. This has been driven by the rising costs of production including basic staples, fuel, energy and a workforce requiring increased pay to meet their day-to-day requirements.

The cost-of-living crisis isn’t limited to individuals and their household costs, but is also being felt by businesses. Having managed to survive through the pandemic in many cases with government support, businesses are now finding there is no light at the end of the tunnel. 

Although interest rates remain at historically low values, they have reached their highest in fourteen years. It is anticipated that these will only increase further. Businesses that have historically been funded through debt are now finding their finance costs are growing.

Additional pressure is coming from an increase in energy and fuel costs, causing production and delivery costs to increase. Where possible, these costs will likely be passed to customers.

For businesses selling discretionary or luxury items, the ability to pass on these costs could be limited if this will cause customers to purchase cheaper alternatives, or even not make any purchases.

The Bank of England is now predicting the country will be in recession at the end of the year. The War in Ukraine is expected to increase the price of fuel and energy as we go into the Winter. Unfortunately it is predicted that this Winter will be particularly tough for businesses and consumers alike.

A new Prime Minister in September will likely bring some reprieve as they bring in new policies to mitigate the cost-of-living crisis. However, any implemented policies will only probably be a sticking plaster than a long last solution.

Many businesses will likely need and want to take this opportunity to review their forecasts for the coming year. This may identify a need to increase prices or restructure part of their business; alternatively, additional funding may be required.

The Recovery Loan Scheme, which was originally launched in April 2021 to help businesses recover from the impact of Covid restrictions, has been extended for a further two years.

We continue to work with our clients on cash flow projections to help them identify when funding may be required for their business.

Get in touch

If your business requires a review and some possible restructuring to be more effective and efficient, please contact our Restructuring Team for a conversation.

You can also check out our articles and guides in our Restructuring Knowledge Hub.