Education

How can UK businesses mitigate rising inflation?

12 Jan 2022

The Consumer Prices Index (CPI) tracks inflation – i.e. how much prices rise over time – on everyday products. In December 2021, the headline rate of inflation in the UK rose to 5.1%: the highest rate in a decade. What does this mean for businesses?

How can UK businesses mitigate rising inflation?

The Bank of England predicts that consumer price inflation will soar to 6% in April 2022 – the highest since 1992 – before it finally starts to ease.

Rising inflation is one of the global economy’s most pressing issues right now. According to ONS data, the cost of food, clothes, footwear, second hand cars and eating and drinking out all rose last year after falling in 2020. 

Continuing supply chain disruption, higher demand for products and services post-lockdown, rising energy costs and labour shortages are all pushing prices up for consumers and businesses alike.

Post-Brexit economic challenges are also making trade more expensive, and with energy bills and taxes set to rise further in April, many business owners are concerned about how they’re going to manage cash flow. 

From construction to retail

A variety of industries are feeling the impact. Last year we wrote about how raw material and labour supply shortages alongside surging demand were driving up prices for the UK construction industry

Retail is also experiencing disruption. The retail giant Next expects its prices to rise by 6% in Q3 and 4 of 2022. 

Next’s boss, Simon Wolfson, said the disparity between wage increases and price rises will go a long way to determine how well his company will fare this year. 

"If wage inflation is in line with our price increases – I don't think it will be, but if it is – then it's not going to be nearly as much of a problem as if wage inflation is a long way behind,” he told Reuters

Like other retail businesses, Next is navigating increased freight, manufacturing and staff costs. According to the retailer, consumers are purchasing fewer items at a slightly higher price. 

So, how can firms mitigate rising inflation? Short-term business funding is one option. It can help businesses bolster their cash flow as inflation continues to rise. 

Trade & supply chain finance

If you require funds to purchase stock or inventory, Trade finance may help because it can enable you to close the payment gap at the beginning for the supply chain so that you can fulfil customer orders on time and still have the cash flow to pay your expenses. 

Supply chain finance is similar to invoice finance in the sense that it lets your business lengthen its payment terms. When the buyer approves your invoice, you receive 100% of the value of your invoice from the lender minus a fee.

If you want to learn more about how you can mitigate challenges resulting from supply chain disruption, sign up to our webinar with Starling Bank and Smith & Williamson.

Apply for trade/supply finance

Cash flow funding 

A cash flow loan is a type of secured finance that helps companies manage their short-term cash flow. The funds can be used for a range of purposes, from buying new stock to hiring more workers. 

Cash flow finance isn’t a long-term solution, but it can provide you with the cash injection your business needs and is repaid by your projected cash flow.

Get cash flow funding

Energy efficiency

Energy consumption accounts for up to a fifth of total business costs. The energy price cap is rising and gas prices are at a record high. As such, businesses are doing everything they can to keep costs to a minimum. 

As a small to medium business owner, there are a variety of actions you can take to help drive down your energy consumption and costs. You could: 

  • Get a smart meter

  • Use energy-efficient office equipment

  • Use energy efficient light bulbs

  • Switch off appliances at the end of the day

You could also consider switching to a new energy supplier

If you’ve been on the same tariff for years, you might not be on the most cost-effective option out there. As long as you’re within 12 months of your contract ending, you can switch to a new business energy deal

Zero and green energy tariffs are available. 

Compare energy suppliers

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