Impact of inflation - responses from all sectors

ended 18. January 2022

This morning @ 07:00, the Office for National Statistics published the latest official inflation data.We asked small business owners, economists, IFAs and mortgage brokers for their views - see below.

12 responses from the Newspage community

Star Quote
"It is the perfect storm for small businesses. We are receiving letters from almost every supplier warning of impending price increases due to rising costs of raw materials, which they are now passing onto us, and which we also have no choice to pass on to our customers. Slim margins and little buying power from a small indie will only further increase the gap between the online giants who can often afford to buy larger quantities and take the hit of price hikes. In a world where people expect fast, efficient service at the lowest price possible, small indies like us will struggle to meet these expectations, combined with the fact that many products have been unavailable for months. The rate at which inflation is rising is gravely concerning."
Star Quote
"Inflation is a real concern and while, at the moment, we are holding our prices firm, I can see that by later in the Spring we will need to increase them. Brexit may be one factor in soaring inflation but I think by far the biggest impact on supply — and therefore prices — has been Covid-19. No one had it factored into business plans, it took everyone by surprise, demand stayed level but supply got constricted, so prices went up. In that sense it's 'O' level economics. Part of the problem is that we have become used to a low inflation, low interest rate economy. We all knew it would cycle around eventually, it always does, but we had it for so long many of us have forgotten what inflation feels like. We're now getting a sharp reminder."
Star Quote
"I absolutely hate raising our prices but the reality is we are being left with no choice. The vicious cycle of our suppliers having to pay more for all aspects of production leads to daily emails of price increases that put even greater strain on our business. We're not talking about profits any longer as it's a fight to survive rather than make money. We are reviewing our prices again in February. it's inevitable that we'll be hurting our own customers further with prices rises as we have no other choice."
Star Quote
"Our latest research shows that employees are increasingly concerned about the effect of rising inflation on their pay. Inflation is eating away at wages at a brutal pace we haven't seen for many years. Lower income workers are being hit particularly hard, especially as the cost of fuel and electricity rises. If employers don't want their workers joining the Great Resignation, they need to pay attention to inflation and increase wages to keep their pay competitive.”
Star Quote
"Rising inflation is hugely concerning for business owners and presents another formidable obstacle for them to overcome following two years of reduced operations due to Covid, staff shortages and supply chain issues. Throw Brexit into the mix and this really does become a vicious cycle for many. Materials shortages and rising costs can means reduced business levels, which impacts income and provides less headroom for growth and recovery. The SMEs we serve are incredibly resilient and the classic British “keep calm and carry on” attitude if fortunately prevailing, for now at least. Supportive and flexible funding is really what keeps heads above water and with the Bank of England expected to raise rates again in February, this has never been more important."
Star Quote
"The diabolical double act of the pandemic and Brexit have served up a stagnant economy and soaring inflation. Put simply, the cost of making, or buying, anything is rising fast, and people are not earning any additional money to pay the increasing cost. It's a complex problem, and all the potential solutions are painful."
"There are never any good options with inflation. Raise rates to control it and reduce business momentum and make mortgages and debts more expensive. Let it run rampant and the cost of living keeps going up. The Bank of England is re-discovering this predicament now and is simply damned if they do and damned if they don't. This is why for many years all Central Banks have a single mandate, which was to control inflation. This has slackened off over the last few years when inflation wasn't a concern and we are now paying the price — literally — for shifting priorities."
"The rising cost of living is hitting everyone and we brought our annual pay rises forward by three months to help our staff with this. However, this is of course an additional cost to our business which we can't pass onto clients. We were lucky on the energy side as we took out a two-year fixed rate deal in the summer so that's at least one worry we don't have. Unfortunately, today's high inflation is a global problem and the government raising interest rates again in February will do little to contain it. But it could be disastrous for the UK economy by hitting hard-working families through higher mortgage costs."
"Even though the cost of living is reaching crisis point, we will most definitely not be putting our prices up. It’s more important than ever to help families to save money, and putting up our prices would go against our values of being affordable and helping people. It’s going to be a difficult time for everyone, but hopefully people see the value in what we do as a business, and will continue to support independents and hospitality through our app."
"Prospective mortgage borrowers are hesitant, right now. Many are concerned about the huge rise in the cost of living. Especially what's coming down the road in April, with the increase in National Insurance and much higher energy bills. However, we are seeing a lot of remortgage demand as people scramble to lock-in at what are still incredibly low rates. Fixing for five years or longer is very popular. For now, we haven't raised our broker fees as it's something we want to avoid if at all possible, but we're keeping it under review."
"The economy faces significant headwinds as the country recovers from the pandemic. Ongoing supply chain problems exacerbated by Brexit, the rising cost of living, tax increases on the way, and now political uncertainty with 'Partygate' sending shockwaves through Westminster and beyond. Against this backdrop it will be difficult for the Bank of England to raise base rates much beyond their current level."
"British manufacturers have been subject to regular increases in the cost of some raw materials since the beginning of 2021. Many absorbed the increases for as long as they could to remain competitive but eventually had to increase prices, too. The pandemic, Brexit and Evergreen situation caused huge supply chain disruption resulting in astronomical shipping fees that also have to be passed on to the customer. Now the energy crisis is adding another layer of cost. Raising interest rates won't solve any of these problems. We need a coherent long-term strategy across all government departments rather than knee-jerk reactions."