Rising costs for businesses and consumers

The cost of living for individuals is widely reported, but business costs are rising even more steeply.

The cost of living for individuals is a topic which is creating a lot of attention in the media in terms of food and energy prices. For most organisations costs are increasing too, and more quickly.

Energy intensive businesses are reducing output. There is wage pressure from newly recruited staff, and existing staff. Supply Chain bottlenecks are causing problems. These are only some of the difficulties businesses are addressing.

HR leaders, in many cases, have led their organisations through major change initiatives over the last two years, starting with no notice and limited opportunity to plan in early 2020. The pattern seen in the UK, with schemes to retain workers such as 'furlough' needing to be quickly understood and implemented, was played out in different ways in many countries, based on individual government responses, so those with international remits had hugely complex issues to work through.

Taking the UK as an example, the next phase has been the ending of remaining government support and initiatives to support businesses through the pandemic, such as VAT relief for hospitality sector.

These same leaders are now having to restructure their businesses again to adapt to what lies ahead. Further changes are needed, perhaps including redundancies and finding new skilled workers, to adapt to the new circumstances and tightening costs and ongoing supply chain re-alignment. Inflation rate for businesses is estimated to reach nearly double that for consumers.

For some it can be a perfect storm which might tip their businesses over the edge, based on comments from the Chairman of the Federation of Small Businesses, who are calling for government support for businesses alongside that recently offered to consumers.

The uncertainty and disruption linked to the war in Ukraine is another aspect which is impacting the global economy and growth prospect.

Confidence is down among consumers, with the British Retail Consortium sharing findings that customers are reducing spend, backed up by a separate report published by Barclaycard noting that discretionary spending for hospitality, subscriptions etc. was being reined in.

Some businesses can adapt where (for example), chefs are creating delicious menus featuring less expensive ingredients and shifting to a 'zero waste' approach, keeping costs down for their restaurant and the customers. But these win-win opportunities are limited, with as yet little sign of the slowing of cost increases.

This means that employees, who are consumers too, are putting significant stress on organisations with expectations of a better and more flexible working experience at the same time as being ready to shift jobs for better reward. Old certainties that people stay in their jobs when things are unstable are not holding true.