As inflation hits 9%, four English businesses explain how they are negotiating soaring prices
Notifications arrive every day at Loveone, an Ipswich gift shop, heralding price increases of 5% to 10% on products it sells, usually adding a couple of pounds to the sticker price.
“If I don’t get my orders in by a certain date then I will have to pay more,” says Cathy Frost, who has run the shop for 15 years. “I can kind of hold my prices for the moment as I ordered stock six months ago, but if the things I’m ordering now are going to be more expensive, I’m asking: ‘Will people pay more?’”
Frost is already worrying about Christmas. Retailers can have six-month lead times to ensure they have the right products for their most important season. “I’m wondering, if this cost of living crisis is really going to be felt in October, will people be spending at Christmas?” she says. “I don’t know if people will spend £30 for a candle when last Christmas they did.”
Footfall in Ipswich is down, which Frost blames on people having less money to spend and also the number of people working from home. Small businesses are not protected by an energy price cap, and so can be left exposed. Frost turned off the heating weeks ago to cut bills. Meanwhile part-time staff costs have also increased, taking away further from the bottom line.
“I’ve been here 15 years and went through Covid but that felt like a bit of a walk in the park compared to this,” Frost says. “We knew we were in lockdown and that we would come out.”
‘You take the hit for as long as you can’
Ben Hancock is the managing director of Oscar Acoustics in Kent, which makes and installs acoustic sound-proofing for interiors. Inflation is delivering a series of challenges just as the £4.5m-turnover company is planning an expansion, adding another building.
It will carry on with the investment, although Hancock says some companies in worse financial positions might not. But inflation is hitting the raw materials the company uses, such as aluminium for fittings that can change price overnight. The weakening pound has not helped either, making imports from the US more expensive and forcing the company to choose between raising prices or lowering margins.
“You have to protect your customers as much as possible,” he says. “You take the hit to your margins as long as you can, and then you make the increase.”
The company is also seeing increased wage demands as it looks for new hires. It is looking at ways of making the job attractive without offering pay increases that Hancock fears could be unsustainable if the economy worsens further. “We have to be a little bit careful if we’re heading into a recession,” he says.
‘The risk has gone through the roof’
David Exwood has about 600 cows and farms about 2,000 acres in Horsham, West Sussex, growing crops including wheat, oats, oilseed rape, maize and beans. He is also vice-president of the National Farmers’ Union.
“Nobody is insulated from what is going on, that’s for sure,” he says. “My fuel bill has doubled, my fertiliser bill has trebled, and these are big numbers, that equates to £250,000 extra for me, just to keep farming in the same way.”
The price of everything from spare parts to fencing and fence posts has increased. “There is not a lot you can do about it,” he says. “Yes you can make efficiencies but you can’t find them on that scale. It puts a lot of strain on businesses. You can only keep it up for so long, in the end something has to give. You either have to do less or have less ambition or grow less crops because you can’t work miracles for ever.”
Exwood says while the price of his wheat has gone up, the crops he feeds to his cattle have gone up “a lot more than that”.
Customers in his farm shop are counting their pennies.“People are very nervous. They might buy less or might buy chicken thighs instead of breast; they might buy braising steak instead of sirloin steak.”
He adds: “The risk of farming has gone through the roof. The volatility is beyond anything we’ve experienced. I can’t budget, I have no idea of predicting what the market is going to do. Farming is a long-term game. I have just bought a bull, I am going to put that bull in [to mate] and those calves won’t be ready for sale until three years from now, 2025. Who knows what the price of beef is going to be in 2025? It’s anybody’s guess.”
‘I have to be quite savvy’
When filling up a 400-litre fuel tank in a 44-tonne lorry, it pays to keep a keen eye on the cost of diesel. Kevin Plews, a director of Plews Brothers, a haulier based in North Shropshire, says there isn’t much they can do about price rises. “It has just kept going up and up since Christmas,” he says. “I have to be quite savvy about how we purchase it.”
Fuel cards can sometimes be more cost-effective, while if prices drop then buying in bulk can be better. Drivers’ wages have also increased, in part because of a shortage (which many analysts suggest is down to post-Brexit immigration limits) and the fact that they are seeing inflation at home themselves. Other costs that have risen include tyres and the urea-based AdBlue, which is added to diesel combustion to reduce harmful pollutants.
At least, for now, interest rates are historically low. “I can remember in the 70s and the 80s when inflation was very high but we had the added aggravation of high interest rates,” Plews says. “Should interest rates rise that’s a worrying thing.”