June 10, 2022

Businesses face increasing operating and pricing structure challenges

Author:
Chris Protacio, Consultant
57% of businesses are anticipating a price increase as a direct result of inflation.

Inflation induced by the global pandemic and the war in Ukraine has caused global energy uncertainty and has thus deeply impacted businesses. Savanta’s UK Business Tracker gives us a glimpse into the current woes of UK businesses and a snippet of what challenges they face in the coming months.

According to our Business Tracker, inflation and rising energy prices are areas of concern for businesses. 73% of businesses state that inflation has had a significant impact. Businesses also see this as a long-term issue with 86% stating that inflation will impact their business negatively. Global energy markets have been in turmoil since the easing of the pandemic, with the ongoing war in Ukraine exacerbating these tensions. Currently, 61% view that their spend on energy will increase significantly compared to beginning of 2021.


These issues will continue to affect the way UK businesses operate and their pricing structure. Inevitably, this will also affect their customers and the demand for their services.

Effects of these challenges

Inflation affects how much businesses charge for their services and as a result may cost them customers. 53% of businesses have seen a decline over the demand of their services and a 23% increase since January 2022, showing that businesses are increasingly feeling the bite as customers are continue to tighten their belts in preparation for a tough winter.

Decreased turnover

With increasingly fewer customers to take up demand for services; weekly income, turnover and sales are seeing a decline. 58% of businesses are reporting declining revenues. This decline is also increasing over time. Our Business Tracker is showing a 17% increase in businesses reporting a decline since January.

Need to increase prices

Fewer customers will likely result in businesses increasing their prices to balance the books. 57% of businesses are anticipating a price increase as a direct result of inflation. Retail & Wholesale and Industry (i.e. agriculture, manufacturing, and construction) are among the most likely sectors to increase their prices moving forward.

Energy prices also represent a significant proportion of business expenditure. Skyrocketing energy prices will inevitably lead to increased prices of businesses’ products.  This increase will more likely affect those in Retail & Wholesale, Industry (i.e. agriculture, manufacturing, and construction), and the Arts and Entertainment sectors.

Silver linings…

But it’s not all gloom and doom and there are some silver linings. Most UK businesses still feel that they can survive the next year. Business survivability is still at a level 73% agreeing that their business will still be operating in the next 12 months – a figure that has stayed consistent throughout the length of the Savanta Business Tracker.

However, there may be casualties, specific industries will be affected differently depending on the type of business they operate. When asked if their specific sector will decline; 38% of Arts, Entertainment and Recreation; and 39% of Retail and Wholesale agreed that there will be a decline in their respective industries.

That said, with the employment rate steadily increasing over the last year[1] businesses are confident of managing this inflation. 60% of businesses state that they can mitigate the impacts towards their customers and costs. This is higher for medium & large businesses (64% vs. 58% for small businesses). Similarly, businesses are also confident on managing their rising energy bills. 59% are confident that they can mitigate this impact on customers and business costs.

Perhaps, anticipated government intervention and the current stability of the labour market, has given businesses the increased confidence to weather the storm the UK is facing.

For more information about our new UK Business Tracker please download our rate card and/or get in touch with one of our business experts here.

[1] https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/employmentintheuk/may2022


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