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.