Notifications arrive daily at Loveone, an Ipswich gift shop, announcing price increases of 5% to 10% on the products it sells, usually adding a couple of pounds to the sticker price.
“If I don’t get my orders by a certain date, I’ll have to pay more,” says Cathy Frost, who has run the store for 15 years. “I can keep my prices for the time being, since I ordered stock six months ago, but if the things I’m ordering now are going to be more expensive, I wonder, ‘Will people pay more?'”
Frost is already worried about Christmas. Retailers can count on six-month lead times to ensure they have the right products for their most important season. “I wonder, if this cost of living crisis is really going to be felt in October, will people spend at Christmas?” she says. “I don’t know if people will spend £30 on a candle when they did last Christmas.”
The affluence in Ipswich has decreased, which Frost blames on people who have less money to spend and also on the number of people working from home. Small businesses are not protected by an energy price cap and therefore may be exposed. Frost turned off the heat weeks ago to lower the bills. Meanwhile, part-time staff costs have also increased, further reducing the bottom line.
“I’ve been here 15 years and went through Covid, but that felt like a walk in the park compared to this,” says Frost. “We knew we were in lockdown and we were going to get out.”
‘You take the hit as long as you can’
Ben Hancock is the managing director of Oscar Acoustics in Kent, which manufactures and installs interior acoustic soundproofing. Inflation is presenting a number of challenges just as the £4.5m turnover company is planning an expansion, adding another building.
It will continue to invest, though Hancock says some financially worse-off companies may not. But inflation is affecting the raw materials the company uses, such as aluminum for fixtures, which can change in price overnight. The weakening pound hasn’t helped either, making imports from the US more expensive and forcing the company to choose between raising prices or cutting margins.
“You have to protect your customers as much as possible,” he says. “You take the hit on your margins as long as you can, and then you make the raise.”
The company is also seeing higher wage demands as it looks for new hires. He is looking for ways to make work attractive without offering pay raises that Hancock fears could be unsustainable if the economy worsens further. “We have to be a little careful if we’re heading into a recession,” he says.
‘The risk has skyrocketed’
David Exwood has around 600 cows and farms of around 2,000 acres in Horsham, West Sussex, where crops including wheat, oats, rapeseed, maize and beans are grown. He is also vice president of the National Farmers Union.
“No one is isolated from what is happening, that’s for sure,” he says. “My fuel bill has doubled, my fertilizer bill has tripled, and these are big numbers, which equate to an extra £250,000 for me, just to keep farming the same way.”
The price of everything from replacement parts to fences and fence posts has increased. “There’s not much you can do about it,” she says. “Yes, you can achieve efficiencies, but you can’t find them on that scale. It puts a lot of stress on companies. You can only keep it up for so long, eventually something has to give. Either you have to do less or have less ambition or farm less because you can’t work miracles forever.”
Exwood says that while the price of his wheat has gone up, the crops he feeds his cattle have gone up “much more than that.”
Customers at your farm store are counting their pennies. “People are very nervous. They could buy less or buy chicken thighs instead of breasts; they could buy braised steak instead of sirloin steak.”
And he adds: “The risk of agriculture has skyrocketed. The volatility is beyond anything we have ever experienced. I can’t budget, I have no idea what the market is going to do. Farming is a long-term game. I just bought a bull, I’ma put that bull in [to mate] and those calves won’t be ready for sale for another three years, 2025. Who knows what the price of beef will be in 2025? It is unknown.”
‘I have to be pretty smart’
When filling a 400-litre fuel tank on a 44-tonne truck, it pays to keep an eye on the cost of diesel. Kevin Plews, director of Plews Brothers, a North Shropshire-based carrier, says there’s not much they can do about price increases. “It’s kept going up and up since Christmas,” he says. “I have to be very smart about how we buy it.”
Fuel cards can sometimes be more profitable, while if prices drop buying in bulk may be better. Drivers’ wages have also risen, in part due to shortages (which many analysts suggest is due to post-Brexit immigration limits) and the fact that they themselves are seeing inflation at home. Other costs that have increased include tires and urea-based AdBlue, which is added to diesel combustion to reduce harmful pollutants.
At least for now, interest rates are historically low. “I remember in the ’70s and ’80s inflation was very high, but we had the added aggravation of high interest rates,” says Plews. “If interest rates go up, that’s something to worry about.”