April brought us the usual mixture of good and bad news, and while some of it seemed discouraging at first, there’s no doubt that most entrepreneurs have been able to adapt to the changing times and still manage to succeed in their various fields. Here’s a look at some of the highlights from this month of business news.
The Cost of Living Crisis Begins To Take Effect
The worst years of crisis are upon us and we can finally see it on a grand scale. Wage rises are stagnant and aren’t even close to keeping up with inflation, whilst childcare costs have skyrocketed out of control. This has caused many parents to take second jobs or more likely, leave their jobs entirely. Whilst living wage initiatives are helping some working families, for most people it’s not enough to make ends meet without taking on extra work elsewhere.
The cost of living crisis has been amplified by other factors including interest rates, unemployment and inflation. In 2021, official figures revealed that UK house prices had risen another 4% year-on-year. That made a total rise of more than 60% since 2013, when then Chancellor George Osborne launched his flagship housing policies aimed at kickstarting Britain’s beleaguered economy. The worst is yet to come as experts are predicting house prices will continue to rise well into next year and beyond.
In fact, the crisis is a perfect storm made up from several economic pressures that have been causing issues for households for years. A number of high-profile reports also highlighted how food prices have risen by more than 10% since 2010. Whilst there’s still no sign of wage rises keeping pace with living costs there will continue to be increasing numbers struggling to make ends meet.
What does this mean for businesses? We have a few curious conundrums to debate.
Firstly, that a higher cost of living means that our employees will be seeking higher wages to compensate – but giving into those wage increases is against the advice of the Bank of England, who assume that a rise in wages will furthermore push inflation.
However, it seems a double-edged sword, as no employers wants to see their staff struggle financially, and inevitably, seek employment in a very buoyant market from another company who is willing to pay above the going rate.
Secondly, we’ll also see lowering demand. As the market as a whole has less cash to spend, we’re going to see an increase in borrowing and lowering sales.
Now is the time to adapt your product to a more thrift-conscious clientele.
The Cost of Imports and Supply Chain Issues From Ukraine and Russia
For a decade, analysts have been warning about supply chain issues related to exporting and importing from Ukraine and Russia. The combination of trade barriers and regulations put into place following political upheaval made it more difficult to import goods from those countries.
Now with the war and it’s uncertain ending, the pressures have been ramped up tenfold.
Aside from the obvious economic impact imposed from ‘becoming less reliant’ on Russian energy sources, there are many day-to-day projects and key manufacturing supplies that come from Ukraine and Russia.
Ukraine is known as the ‘breadbasket’ of Europe, and pre-war it accounted for huge volumes of wheat, grain and sunflower oil exports to other countries.
In the UK, we produce 90% of our own wheat… but there’s a big catch. The fertiliser we rely on to grow that wheat comes from Russia.
We’re likely to see huge changes that will trickle down into every level of the supply chain due to these new shortages.
China’s COVID Lockdown
Although the UK has significantly higher case numbers of COVID compared to China, the country’s ambitious ‘zero-tolerance’ policy towards the disease is having some monumental effects on their economy.
China’s government is imposing a strict zonal lockdown in any city where cases are on the rise. The extremely strict measures mean people are often confined to their homes, not even allowed to head out for groceries or exercise.
And of course, this also means they’re not able to go to work. Recently, the lockdown measures in Shanghai meant one of the world’s busiest ports was temporarily, completely shut down.
Not only that, over 30 multi-national companies host their headquarters in Shanghai, meaning operations also come to a screaming halt for many. I’m sure we don’t need to tell you how China is also one of the world’s biggest manufacturing hubs, and these lockdowns are sure to cause delays to supply chains around the world. Which are, of course, already under intense pressure.
Businesses around the world will be watching China’s policy in the hopes that their strict measures do cut down cases significantly and lead to swift reopening’s.
Travel Reopens To Booming Demand
In early 2021, foreign travel restrictions on people from certain countries were lifted after being enacted by President Trump’s executive order. On the 18th March, the UK’s Boris Johnson followed suit and lifted all UK-based COVID-related travel restrictions.
Immediately following their removal, demand for travel skyrocketed, thanks in part to the upcoming bank holiday weekends and school holidays for Easter.
Unfortunately, the UK travel system wasn’t ready. Although they had predicted a return to travel, many companies didn’t anticipate such a swift return in demand. Couple that with the fact that the UK labour market is facing historic shortages, and that COVID related issues were still causing mass staff absences, places like airports simply didn’t have the staff to deal with the influx of customers.
As we move past the OFGEM Price Cap increase and face further inflation, will the demand for travel stay steady, or will it take another dip?
Streaming and Subscription Services Take a Hit
Over the start of 2022, many popular streaming and subscription services have been releasing disappointing earnings reports. Netflix’s massive share losses have been well documented, but even the likes of Disney+, HBO and Apple TV (even after their historic Oscars win) have taken a battering.
A few years ago in the business world we were all raving about the sheer brilliance of the subscription model. A simple way to produce reliable, continuous income by redesigning your product, and offering your customers the ultimate in convenience.
We saw services arise from subscription shavers, meal kits, craft kits, vitamins and more. However, it seems that now we’re amid a sharp dip in disposable income, consumers put their subscription services on the chopping block first.
Plus, now we’re out of lockdown, many consumers are prioritising spending time out and about with family, rather than binge watching on the sofa.
Pile that on top of Netflix’s controversial decision to end password sharing, and mix in a little dash of the fact that most viewers will simply binge watch a series in a few days, then cancel their renewal.
Will this be a poor year for the subscription model? Or will these companies find a way to innovate once again?
Energy Price Rises Hit and Petrol Prices Soar
Rising oil prices continue to be a concern for many governments and economists, though some have disputed whether price rises are entirely due to supply and demand. However, some say that there’s still time for oil-producing nations to change course. Alternative fuel sources may become increasingly attractive as energy costs rise—and major corporations and small businesses alike are starting to explore options such as solar power and electric vehicles.
The UK has it’s sights set firmly on the nuclear solution too. With the ongoing construction of Hinkley Point C in Somerset, there’s no doubt that politicians will be firmly backing the project with further support and funding.
There’s no short-term solution to the rising costs of energy and petrol however, so businesses will be waiting with baited breath to see if the Government will provide any further support before the subsequent further price increases predicted in October.
What’s In Store For Businesses In May?
In such a chaotic economic situation, how can businesses expect to predict anything in May?
Well, here at NTG we’re going to take an educated guess. We predict business news in May will focus on the increased risk of a UK economic recession and watch the results of the UK Local Elections. If the results show a strong decline in support for the conservatives, we can expect a significant scramble to shake up the discourse.
Whether that means a new prime minister or more radical policies to win back voters, it’s yet to be seen.
Let us know how these stories are affecting you and your business! We’d love to chat, head over to @ntgtraining on Instagram or leave us a comment below.