National News Cost of Living Crisis

We will see, the cost of living is effecting the whole of Europe, we’re not exclusive byte higher cost of living.
We will see? That's the fkg problem! The government sitting on its collective hands doing nothing but promising some future cut in corporation tax!! If a company's profits are extinguished by sky high energy cost there are no profits on which to reduce taxation. It's a return to voodoo economics.

One thing that is for sure is that the government will have to do something eventually as I don't think even it wants to oversee an implosion of the economy and the very dark things that would follow. The question is how long will it take to act and what damage will be done in the intervening period.

But I bet he won’t employ the 900 employees he will lose when they move.
What point are you trying to make here?
 
I've read stories of small UK businesses (Chip shops) getting huge increases from hundreds of pounds to thousands in their energy monthly direct debits as apparently the current price cap is for households only and not businesses.

This is a crisis that almost everyone can see is coming, and only the blinkered refuse to acknowledge it. We urgently need a plan to cap bills / subsidise before businesses go bust and families can't afford to heat their homes in the Winter.
Nobody is really talking about the businesses that are going to go bust and the redundancies such a scenario will cause across the country. We are sleepwalking into utter catastrophe.

That our parliament has not been recalled while the governing party sort out yet another internal squabble is a complete disgrace.
 
Nobody is really talking about the businesses that are going to go bust and the redundancies such a scenario will cause across the country. We are sleepwalking into utter catastrophe.

That our parliament has not been recalled while the governing party sort out yet another internal squabble is a complete disgrace.
I am 🙂. So's @bazzer9461 but he thinks we should wait and see.
 
We will see? That's the fkg problem! The government sitting on its collective hands doing nothing but promising some future cut in corporation tax!! If a company's profits are extinguished by sky high energy cost there are no profits on which to reduce taxation. It's a return to voodoo economics.

One thing that is for sure is that the government will have to do something eventually as I don't think even it wants to oversee an implosion of the economy and the very dark things that would follow. The question is how long will it take to act and what damage will be done in the intervening period.


What point are you trying to make here?
He will use it as an excuse to reduce his employees
 
I am 🙂. So's @bazzer9461 but he thinks we should wait and see.
Yes let’s.
The leadership race is almost over Parliament will resume Labour will come out with their windfall tax which was first mooted by the libdems but Ed Davey is trying to keep the status quo in politics if what could be the outcome at the next election which could be a coalition once again.
 
I wouldn’t be surprised if Sunak concedes soon. Eleven government whips favour Liz Truss.
Strangely Conservative members seem to want BJ as opposed to the two contenders
 
He will use it as an excuse to reduce his employees
Why would he want to or why should he have to be either over or understaffed? That's just an unfounded slur on someone you don't know. Why do you feel the need to say these things? I'm genuinely perplexed.
 
That's because they're idiots.
Fishy Rishi who only tells you what you want to hear regardless of whether it's true and is behind the 'well if you don't support paying more tax you're against the NHS' or Nuclear Truss?
Yeah, Boris is the better choice. At least he had the pressure that all the MPs were against him and when the time came could have ousted him in a vote of no confidence. That may be 10 months away, but he'll have known he had to improve things in those months to win that vote. The only reason he saw sense and ended covid restrictions at the start of this year was because 100 MPs were against them and could have triggered the vote.
With a new PM we're back to square one. With both of those being utterly useless, we're further behind.
 
...and they might not be wrong in that.
They've been wrong on pretty much everything else over the last decade or so. Their choices and decision making has been nothing short of abject.
I think as a general rule of thumb from now, the country needs to ask Tory members what they think is a good idea....

.....and then do the exact opposite :)
 
Talk of interest rates rising again next month by 1/2% but may be 3/4%.
I think plenty of economists consider they should be higher than present levels. Could easily get near 4% by Christmas
 
Nobody is really talking about the businesses that are going to go bust and the redundancies such a scenario will cause across the country. We are sleepwalking into utter catastrophe.

That our parliament has not been recalled while the governing party sort out yet another internal squabble is a complete disgrace.
It's a genuine problem.

Ryan, I appreciate your transparency on this forum and that you don't use a pseudo name to disguise your identity. I have tended to separate my personal life from the escapism of this forum through personal choice (General Lee also carries more weight) however on this subject matter it has most recently engrossed my work life over the last few months.

I am a Director of a couple of small-medium sized businesses. One in particular is an Oxfordshire hair salon (I am the last person you would ever want cutting your hair so don't ask!). I employ five staff in this particular business which commenced trading roughly four years ago. I would consider myself a responsible and resourceful owner insofar as ensuring the business is ticking over, remains profitable and staff, suppliers and contractual obligations are paid on time. As someone in their early thirties I would also consider myself over the last 5-10 years to be a competent business owner.

The margin for the aforementioned business has decreased over the last year due to a number of economic factors. There is however a balance to strike; you don't want to whack your prices up just because everyone else is. If people don't have the same levels of disposable income as 12 months ago, you might not have anyone spending money anyway, so sticking everything up isn't necessarily the obvious response. Historically I've absorbed a lot of the costs because, that's our duty to help the consumer (whilst not shooting yourself in the foot if done sustainably). Our end of year is November '22. Our energy contract expires on 21st December '22. Our most recent quote for electric current sits at £1,000 per month from December. That's a lot of money and a lot more than we current spend. Other 'stuff' has gone up too, incrementally. Our product cost increased twice by May this year. Staff wages have increased to cover the increased cost of living and our average customer spend is decreasing (less on product sales, treatments and pampering) and less frequently. That's £10-£20 per customer spending less each time and £100-£150 less twice per year. It is becoming a functional service rather than the desirable. Marketing costs subsequently increase to drive new business. It's not necessarily a reflection of a bad business, just a service that people can no longer afford with the same level of frequency.

Last month I took a look at our overheads. As a business which has been trading for a while you do tend to accumulate... Stuff. Whether it's subscription services, increased coffee spend, improvements of general bits to improve the work environment, the service levels or the business in general. Some of it (most of it actually) is unavoidable and is a by-product of a growing/busy business so it's tricky to extrapolate much more and identify areas for a reduction in spend. Last month (July) the salon sat at 95% capacity, which ought to be full-proof to ensuring profitability. It isn't entirely. For the first time since setting it up I am conscious about looking over my shoulder. Our fixed overheads have increased by circa £2,500 per month since January '22. We are by no means in any danger of not turning a profit (we do), however I have written off the next 12 months from a personal point of view in relation to things I want to achieve on a personal level. The cost that the company bears in comparison to 12 months ago is significant. My external interests away from said business ensure I am comfortable, however that's £3,500 out of the business from December each month which would ordinarily (subject to corporation tax) I would have paid myself. To clarify, that's £35,000 - £42,000 less in my pocket each year. I still earn from other interests and remain comfortable. However I would consider this a busy enterprise and one which doesn't struggle. My concern is not for me (well, it is) but for others. I suspect if there isn't further intervention in the next six months the problem will escalate and our margin for error will eventually erode. For a lot businesses they won't have any sort of margin to play with.

I am in some ways fortunate to be in a position to write off the next 12 months. The burden will be on business owners to 'suck it up' at this point. For every responsible owner, there will be twice as many irresponsible who don't have cash in the bank to cover for 12 months of rainy days and they'll go pop. I suppose if you aren't flexible to navigate these issues, it could be argued that they weren't well positioned however with COVID and the cost of living crisis, I don't think many could have predicted for this many 'rainy days'.

The economy is propped up by many businesses and this will hit more people than most think. It won't just be lower income households either... The problems will simply be different.
 
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What would have been good was the revenue from North Sea oil being put into a Sovereign Wealth Fund like Norway's rather than used to pay for short-term tax cuts. Norway's fund is currently worth $1.4trillion and is the biggest in the world.
Yes, this.

It’s amazing to me that this is ignored by so many people who think Thatcher was a good PM. Worse than Brown’s selling of the gold, this was one decision to chase short term votes which has absolutely screwed over this country more than any other I can think of. Literally costs us over a trillion pounds by now. We’d be much, much better off if she’d followed Norway’s example.
 
Have to agree with you on that. An opportunity missed.
I still think Brown was wrong on gold and tax on pension funds too.
The most worrying thing at the moment is the challenges facing businesses. Rising wages and costs associated with fuel will doubtless cause redundancies on a wide scale. The government somehow needs to address that
 
It's a genuine problem.

Ryan, I appreciate your transparency on this forum and that you don't use a pseudo name to disguise your identity. I have tended to separate my personal life from the escapism of this forum through personal choice (General Lee also carries more weight) however on this subject matter it has most recently engrossed my work life over the last few months.

I am a Director of a couple of small-medium sized businesses. One in particular is an Oxfordshire hair salon (I am the last person you would ever want cutting your hair so don't ask!). I employ five staff in this particular business which commenced trading roughly four years ago. I would consider myself a responsible and resourceful owner insofar as ensuring the business is ticking over, remains profitable and staff, suppliers and contractual obligations are paid on time. As someone in their early thirties I would also consider myself over the last 5-10 years to be a competent business owner.

The margin for the aforementioned business has decreased over the last year due to a number of economic factors. There is however a balance to strike; you don't want to whack your prices up just because everyone else is. If people don't have the same levels of disposable income as 12 months ago, you might not have anyone spending money anyway, so sticking everything up isn't necessarily the obvious response. Historically I've absorbed a lot of the costs because, that's our duty to help the consumer (whilst not shooting yourself in the foot if done sustainably). Our end of year is November '22. Our energy contract expires on 21st December '22. Our most recent quote for electric current sits at £1,000 per month from December. That's a lot of money and a lot more than we current spend. Other 'stuff' has gone up too, incrementally. Our product cost increased twice by May this year. Staff wages have increased to cover the increased cost of living and our average customer spend is decreasing (less on product sales, treatments and pampering) and less frequently. It is becoming a functional service rather than the desirable.

Last month I took a look at our overheads. As a business which has been trading for a while you do tend to accumulate... Stuff. Whether it's subscription services, increased coffee spend, improvements of general bits to improve the work environment, the service levels or the business in general. Some of it (most of it actually) is unavoidable and is a by-product of a growing/busy business so it's tricky to extrapolate much more and identify areas for a reduction in spend. Last month (July) the salon sat at 95% capacity, which ought to be full-proof to ensuring profitability. It isn't entirely. For the first time since setting it up I am conscious about looking over my shoulder. Our fixed overheads have increased by circa £2,500 per month since January '22. We are by no means in any danger of not turning a profit (we do), however I have written off the next 12 months from a personal point of view in relation to things I want to achieve on a personal level. The cost that the company bears in comparison to 12 months ago is significant. My external interests away from said business ensure I am comfortable, however that's £3,500 out of the business from December each month which would ordinarily (subject to corporation tax) I would have paid myself. To clarify, that's £42,000 less in my pocket. I still earn from other interests and remain comfortable. However I would consider this a busy enterprise and one which doesn't struggle. My concern is not for me (well, it is) but for others. I suspect if there isn't further intervention in the next six months the problem will escalate and our margin for error will eventually erode. For a lot businesses they won't have any sort of margin to play with.

I am in some ways fortunate to be in a position to write off the next 12 months. The burden will be on business owners to 'suck it up' at this point. For every responsible owner, there will be twice as many irresponsible who don't have cash in the bank to cover for 12 months of rainy days and they'll go pop. I suppose if you aren't flexible to navigate these issues, it could be argued that they weren't well positioned however with COVID and the cost of living crisis, I don't think many could have predicted for this many 'rainy days'.

The economy is propped up by many businesses and this will hit more people than most think. It won't just be lower income households either... The problems will simply be different.
Thanks for such a transparent and detailed post. That’s really interesting to hear and highlights the point that it’s getting incredibly tight for a lot of people.

You’re right in what you say that there are plenty of businesses that won’t have been able to prepare for this many rainy days in such a short space of time, but the difference now rather than two years ago when the pandemic first took hold is that now there appears to be absolutely nothing coming back at businesses. No help, no schemes - no care at all at present. We don’t even have a government and the two people vying to assemble the next one are more concerned with knocking bells out of each other, and finding ways to come across as the most hard nosed and “tough” which often involves referring to dealing with hard times as being soft and offering handouts. It’s a worrying climate and a dangerous set of circumstances that I genuinely fear is going to knock thousands upon thousands of people on their arses over the next six months or so.

It sounds like you’re doing right by your staff and giving as much to them and the business as you can, which I respect hugely. Many business owners would make it other people’s problems in this scenario, so I think it’s very admirable that you’re essentially leaving / putting money in and absorbing the hit yourself. Whether you’re comfortable enough to be able to do that or not is irrelevant in my eyes - it’s a worthy and moral choice on your part.

It actually sounds like your current quote of £1,000 per month for electric as of December is very cheap compared to many, although I am far from downplaying anything on that front. There was a small business owner on the radio last week who said that his business had been told that its energy costs would be rising from £2,000 per month to over £10,000 per month, and they were far from alone in being given such eye watering quotes. I’ve heard numerous business owners stating in no uncertain terms that unless something happens between now and October, which is barely six weeks away, that their businesses will categorically have to close before the end of winter. I simply cannot fathom how this is being allowed to happen and would argue that it requires action as drastic and widespread as the financial crash in 2008, when pretty much the entire banking system came within hours of collapsing to zero and sending the world back to the Stone Age.

For every business owner like you who is both able and willing to “suck it up” for the next year or so there will be thousands who aren’t, and in that scenario we’re potentially looking at an unemployment atom bomb. I am genuinely starting to panic that nobody who actually matters is even looking in the direction where the iceberg sits, and if they are then the only explanation would be that they’ve made the decision that we’re going to ram it and see what happens.
 
I am working with a company looking to acquire around 40 pubs (seems an odd time to do it but there we go). Based on their calculations, they will have to stop selling food in order to break even. The cost of fuel combined with rising food costs is making it unattainable. Suppliers will put in volume tolerance clauses in their contracts too, so if you use less than you said you would, you will be charged for this. So it will be expensive to remain closed!

I just don't understand why Truss is ruling out a windfall tax. The number of smaller businesses will dwindle with these new costs, whilst Centrica make over a billion in profit. British Gas Business will hit when companies default on their bills, so Centrica may have to bail out BGB in the future anyway.

We are sleep walking into a disaster with no solutions being provided by the incumbents, apart from less Solar in fields?!
 
Thanks for such a transparent and detailed post. That’s really interesting to hear and highlights the point that it’s getting incredibly tight for a lot of people.

You’re right in what you say that there are plenty of businesses that won’t have been able to prepare for this many rainy days in such a short space of time, but the difference now rather than two years ago when the pandemic first took hold is that now there appears to be absolutely nothing coming back at businesses. No help, no schemes - no care at all at present. We don’t even have a government and the two people vying to assemble the next one are more concerned with knocking bells out of each other, and finding ways to come across as the most hard nosed and “tough” which often involves referring to dealing with hard times as being soft and offering handouts. It’s a worrying climate and a dangerous set of circumstances that I genuinely fear is going to knock thousands upon thousands of people on their arses over the next six months or so.

It sounds like you’re doing right by your staff and giving as much to them and the business as you can, which I respect hugely. Many business owners would make it other people’s problems in this scenario, so I think it’s very admirable that you’re essentially leaving / putting money in and absorbing the hit yourself. Whether you’re comfortable enough to be able to do that or not is irrelevant in my eyes - it’s a worthy and moral choice on your part.

It actually sounds like your current quote of £1,000 per month for electric as of December is very cheap compared to many, although I am far from downplaying anything on that front. There was a small business owner on the radio last week who said that his business had been told that its energy costs would be rising from £2,000 per month to over £10,000 per month, and they were far from alone in being given such eye watering quotes. I’ve heard numerous business owners stating in no uncertain terms that unless something happens between now and October, which is barely six weeks away, that their businesses will categorically have to close before the end of winter. I simply cannot fathom how this is being allowed to happen and would argue that it requires action as drastic and widespread as the financial crash in 2008, when pretty much the entire banking system came within hours of collapsing to zero and sending the world back to the Stone Age.

For every business owner like you who is both able and willing to “suck it up” for the next year or so there will be thousands who aren’t, and in that scenario we’re potentially looking at an unemployment atom bomb. I am genuinely starting to panic that nobody who actually matters is even looking in the direction where the iceberg sits, and if they are then the only explanation would be that they’ve made the decision that we’re going to ram it and see what happens.
My concern is that the problem is being viewed in reverse; the bottom up rather than the top down (or even the middle up and down).

In some ways it is right that business owners have an obligation to help alleviate some of the troubles that staff bear. You spend much of your adult life in work so they do (whether they like it or not) carry a lot of responsibility to assist in their duty to improve working conditions and lifestyles through the balance of work against time off.

In my view the management of the economy smacks of short-termism in mind. It does strongly suggest negligence and irresponsibility given those that previously had sustainable businesses are being asked to spend exponentially more on something which based on exorbitant prices isn't workable. I think you might be referring to the chip shop owner that called into LBC citing his increased costs for gas negated their ability to trade seven day weeks which translated to scaling their staffing levels back (I'm paraphrasing) by more than half (20 to 5) and subsequently to three days per week.

The governments role to not impose *something* on the cost of energy is destructive and dare I say, calculated. My sense is that this is a bit kamikaze and could spike tax receivables in the shorter-term but in the medium-term kill any future monies. I have in the last few years taken on a lot of medium-high risks which happily have come off. I/the businesses that I own contribute VAT payments, corporation tax and employee taxes. I don't know what the total value this has however I would think it's in the high five figures over the last 12 months. In effect businesses are tax collectors. If those tax collecting entities disappear through lack of support or sustainability (along with many others including their workforce), as you say it could be damaging at ground level and for governments. A successful economy requires money to circle. If people don't spend or are priced out of receiving or delivering services or products, it's a bit difficult to navigate out of that hole. People will be inclined to keep hold of any money and be reluctant to do anything with it.

I personally view that a low tax economy would better service businesses and the population as a whole. It's not presently workable to continue as we are however I'm convinced it would go some way to address the absolute priority that people will not be able to put food on the table.
 
My concern is that the problem is being viewed in reverse; the bottom up rather than the top down (or even the middle up and down).

In some ways it is right that business owners have an obligation to help alleviate some of the troubles that staff bear. You spend much of your adult life in work so they do (whether they like it or not) carry a lot of responsibility to assist in their duty to improve working conditions and lifestyles through the balance of work against time off.

In my view the management of the economy smacks of short-termism in mind. It does strongly suggest negligence and irresponsibility given those that previously had sustainable businesses are being asked to spend exponentially more on something which based on exorbitant prices isn't workable. I think you might be referring to the chip shop owner that called into LBC citing his increased costs for gas negated their ability to trade seven day weeks which translated to scaling their staffing levels back (I'm paraphrasing) by more than half (20 to 5) and subsequently to three days per week.

The governments role to not impose *something* on the cost of energy is destructive and dare I say, calculated. My sense is that this is a bit kamikaze and could spike tax receivables in the shorter-term but in the medium-term kill any future monies. I have in the last few years taken on a lot of medium-high risks which happily have come off. I/the businesses that I own contribute VAT payments, corporation tax and employee taxes. I don't know what the total value this has however I would think it's in the high five figures over the last 12 months. In effect businesses are tax collectors. If those tax collecting entities disappear through lack of support or sustainability (along with many others including their workforce), as you say it could be damaging at ground level and for governments. A successful economy requires money to circle. If people don't spend or are priced out of receiving or delivering services or products, it's a bit difficult to navigate out of that hole. People will be inclined to keep hold of any money and be reluctant to do anything with it.

I personally view that a low tax economy would better service businesses and the population as a whole. It's not presently workable to continue as we are however I'm convinced it would go some way to address the absolute priority that people will not be able to put food on the table.
At a simplistic macro economic level any given economy at any given time will generate a fixed cumulative profit shared across those businesses. If, all of a sudden, a small cabal of businesses are able to grab a disproportionately large share of that profit it means many other businesses will become loss making, which is exactly where we are heading. Only government intervention to rebalanced the share out of profit (ie windfall tax used to keep all entities energy prices at a reasonable level) can resolve the issue.
 

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