Inflation and how it is impacting you

ended 19. October 2021

At 07:00 on Wednesday, the Office for National Statistics is publishing the latest inflation data. Soaring energy bills, supply chain issues and labour shortages due to Brexit and the pandemic, mean inflation is expected to rise further. With this in mind, 3 simple questions:

  • How, if at all, is rising inflation impacting you and/or your business?
  • Are you planning to raise your prices to reduce the impact of inflation?
  • Should the Bank of England raise rates to try and contain rising inflation?

Please don't write a giant economic opus, whatever you do. 4-5 laser sharp sentences is all we want to see. Remember: journalists like soundbites, not essays! 

As ever, if you're a Premium user, your response will be edited by an experienced hack to make it read dead well and stuff. Premium responses are also higher up the viewsWire so are likely to be seen by journalists first.

9 responses from the Newspage community

"The problem is that the Bank of England is caught between a rock and a hard place. Yes costs are rising because of shortages of fossil fuel (we best get used to that) and a lack of cheap labour (we best get used to that, too) but the result is that people are feeling very stretched already. The recovery of the economy feels a bit brittle and if they whack up the cost of people's mortgages, the economy will tank so that isn't a solution. The reality is that we're all just going to have to swallow prices for things normalising but rather than try to simply preserve the status quo, a government might want to use this as an opportunity to back the green revolution, STEM education and modern methods of working. Change is coming so let's embrace it."
The global economy hasn't been able to generate real inflation for over a decade, and yes, whilst it can cause issues, given the past 18 months we've just been through, it would be more sensible to allow things to play out than for the BoE to start fiddling with rates when the economy is still trying to recover.
"Due to concerns about rising inflation and potential labour shortages, we brought our annual wage rise forward to keep our staff happy. We are planning to absorb that cost rather than increase our fees. I'm not sure the Government raising interest rates would help, as inflation seems to be mainly due to supply issues rather than excess demand."
Star Quote
"The answer to rising inflation is simple for small business owners, right? Just whack up your prices to combat it and all's well. Sadly that doesn't work, as it risks losing you customers. It's alright for the big boys as they have the financial strength to keep their prices low, but small business owners, as ever, have to take a hit on their real-world income and spending power."
"There is every expectation that we will see inflationary pressures continue to build over the coming weeks and while some do believe that we may even see a Bank Base Rate rise in the next 3 / 4 months to help curb these inflationary pressures, I believe the Bank of England will hold its nerve. It may be, however, that we are near the end of the ultra-low interest rate cycle as the cost of funds, represented by SWAP rates, which lenders base their fixed rates on, has risen dramatically recently. This may well play out in more expensive mortgages products, especially for 3-year and 5-year fixed rates in the near future. "There is much to play out in the economy yet and the dreaded bug has not gone away before a potential rise again in the traditional flu season. Confidence, though growing, is still fragile, so I think the Bank of England will hold off making any rash rate rises for some time yet." It is of course a delicate balancing act, and we know that our property market is very much connected to consumer sentiment. However, with unemployment still low, historical pent-up demand for property still being released as lenders come back into the market at higher LTV’s and improving criteria once more, and a continuation of low rates for a while yet, there is no reason to believe we are on capricious ground.
"Inflation rising is not something that we have discussed in terms of increasing our own advice fees, but we will have to keep any eye on it as at some point we will have no choice but to raise them, in order to maintain service levels and client experience. "Of more immediate concern is how inflation and the rising cost of living impacts lenders' affordability calculations. The method used to determine the maximum loan a lender is happy to grant to you. This is an assessment of your income versus your outgoings (actual, or more likely assumed, using ONS data). Anything that increases the outgoings side of that equation is going to potentially reduce the maximum mortgage obtainable; a double whammy given the increase in house prices and the need for most people to be looking at larger mortgages to fund their purchase now. "I am hopeful that the longer range inflation forecasts will show a reduction from the figures we are seeing currently, as comparing 2021 to 2020 is always going to deliver some odd results, as we start to compare 2022 to 2021 we may see some of this inflationary pressure unwind. If not then the Bank of England will need to respond, however any increases will be slight and spread out over time to avoid a fiscal shock to the economy. For many households the impact is further muted; as car finance and personal loans are on fixed rate of interest in the main, the effect will be even less if they have a fixed rate mortgage too. It will be businesses that feel any increases immediately, as most commercial debt is not set up on a fixed rate basis."
Star Quote
"The energy crisis and rising cost of living are piling ever more pressure on top of already drowning small businesses. One of my main ingredients has gone up by 25% and I supply the hard-hit hospitality sector so can’t put my prices up. I bake for a living and I’m worried about keeping the ovens on. Happy Brexit!"
"The economic recovery is too fragile to tolerate increased interest rates at this stage. While inflation is unhelpful, there needs to be institutional confidence to drive underlying growth. Unfortunately, we will be increasing prices but this is the first time in three years and margins cannot be eroded further if the business is to develop and invest for the future."
"All costs are on the rise but for small businesses the decision to increase their own prices accordingly is a tricky one. At some point there may be no choice, but retaining customers is paramount at this time and it is a decision fraught with danger for small business owners."