Notifications arrive daily at Loveone, an Ipswich gift shop, announcing price increases of 5-10% on the products it sells, usually adding a few pounds to the listed 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 shop for 15 years. “I can kind of hold my prices at the moment because I ordered stock six months ago, but if the things I’m ordering now are going to be more expensive, I ask, ‘Will people pay more?’ “
Frost is already worried about Christmas. Retailers can have 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 kick in in October, are people going to spend on Christmas?” she says. “I don’t know if people will spend £30 on a candle last Christmas.”
Ipswich footfall is down, which Frost attributes to 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 may therefore be exposed. Frost turned off the heat weeks ago to keep the bills down. Meanwhile, part-time staff costs also increased, which further reduced the bottom line.
“I’ve been here 15 years and been through Covid, but it felt like a walk in the park compared to that,” Frost says. “We knew we were confined and that we would 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 acoustic soundproofing for interiors. Inflation poses a series of challenges just as the £4.5m business plans to expand, adding another building.
He will pursue the investment, although Hancock says some companies in poor financial condition may not. But inflation hits the raw materials the company uses, such as aluminum for fittings, the price of which can change overnight. The weaker pound hasn’t helped either, making imports from the United States more expensive and forcing the company to choose between raising prices or cutting margins.
“You need to protect your customers as much as possible,” he says. “You take the hit on your margins for as long as you can, then you do the raise.”
The company is also seeing an increase in wage demands as it seeks new hires. He is looking for ways to make work attractive without offering pay rises that Hancock says could be unsustainable if the economy deteriorates further. “We have to be a little careful if we’re heading into a recession,” he says.
“The risk has exploded”
David Exwood owns around 600 cows and farms around 2,000 acres in Horsham, West Sussex, growing crops such as wheat, oats, rapeseed, maize and beans. 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 those are big numbers, it equates to an extra £250,000 for me just to keep farming the same way.”
The price of everything from spare parts to fences and fence posts has gone up. “There’s not much you can do about it,” he says. “Yes, you can achieve efficiencies, but you can’t find them at this scale. This puts a lot of pressure on businesses. You can only keep it so long, in the end something has to give. Either you have to do less, or have less ambition, or grow fewer crops because you can’t do miracles forever.
Exwood says that while the price of his wheat has gone up, the crops he feeds for his cattle have gone up “much more than that”.
Customers at his farm shop count their pennies. “People are very nervous. They might buy less or buy chicken thighs instead of breast; they could buy braised steak instead of sirloin steak.
He adds: “The risk of agriculture has exploded. The volatility is beyond anything we have experienced. I can’t budget, I have no idea to predict what the market will do. Farming is a long term game. I just bought a bull, I’ma put that bull in it [to mate] and those calves will only be ready for sale in three years, in 2025. Who knows what the price of beef will be in 2025? It is someone who guesses.
“I have to be pretty savvy”
When filling a 400 liter fuel tank in a 44 ton truck, it pays to keep a close eye on the cost of diesel. Kevin Plews, director of Plews Brothers, a North Shropshire-based transporter, says there is little they can do about the price hikes. “It has been steadily increasing since Christmas,” he says. “I must be pretty savvy about how we buy it.”
Fuel cards can sometimes be more cost effective, while if prices drop it may be better to buy in bulk. Drivers’ wages have also risen, partly because of a shortage (which many analysts say is below post-Brexit immigration limits) and because they are seeing inflation themselves 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 back in the 70s and 80s when inflation was really high, but we had the added aggravation of high interest rates,” Plews says. “If interest rates were to rise, that’s a worrying thing.”