The living costs crisis will hit millions of homes, but small businesses will suffer too.
It is everywhere we look: on news bulletins, on social media, in the business pages.
Inflation in the UK is running at the highest rate for more than 40 years, at which time it was in double digit figures. I remember the effect it had on our businesses. You had to keep running just to stand still.
Inflation eats at the value of money like nothing else and I think the Bank of England has been complacent in allowing this entirely foreseeable situation to arise.
Many business owners have never known high inflation. Do not be under any illusions. Inflation is a scourge on everyone. And this comes at a time when energy costs are increasing at a rate not seen in decades.
Businesses are under no obligation to give automatic cost of living wage increases to their employees. The best way to pay people is on results, which encourages increased productivity, great service and which automatically flows through to the bottom line in profitability.
That in turn allows the business to pay all employees a profit share based on the numbers, while you should always increase the pay of individual star performers who are key to the business.
This, in my view, is a much more sustainable model in inflationary times.
We are also right in the middle of a period when many employees are looking to change jobs and businesses should look at the overall benefit packages for their people.
Healthcare support including Employment Assistance Programmes is one way to help your employees with any mental or personal issues they may be facing. Providing private health cover is another option. If they leave the company, they obviously lose this major benefit, so it acts as a retention tool.
Some companies also have a benefits programme where people can get discounts on gym memberships, cafés, restaurants, and holidays. All these extra enhancements help to retain employees. It is important at the year end to list the full benefit packages to ensure your staff know what a super company they are working for.
There has never been a more important time to focus on staff retention, with a reported three-quarters of UK workers looking to leave their jobs this year. Retaining staff saves you money in the long run, in areas such as recruitment, induction and training programmes.
It certainly seems as if business owners could have some tough decisions ahead. It is important to have a conversation with your employees and explain the situation so they are crystal clear on where they stand.
With energy costs soaring and wholesale prices having quadrupled in the past year alone, it is important for high energy using businesses to save cost wherever they can. There are some simple steps that can be taken to lower energy consumption – making it standard policy to switch off all electric equipment at the end of the day and when not in use, is a great place to start and can drastically reduce costs with little to no effort.
You might think there is no harm in leaving computers on standby. But did you know that doing that, as opposed to closing them down overnight, can cost an office of 16 employees as much as £1,742 a year. We have 1,000 employees in our head office – so imagine how much money that saves?
Ensuring a robust maintenance programme for all your machinery will ensure they continue to run at their best and as efficiently as possible, as well as saving you money on unwanted repair bills.
And while it might make a dent in your pocket initially, making some small investments will save you money in the long-term. For example, switching to automated lighting systems and LED bulbs, which can save up to 90 per cent on your lighting bill, and investing in new, more energy-efficient equipment.
During the cold winter months, do not waste your money heating empty rooms or buildings. Only heat the areas of your office that require it.
Fixing insulation material is key to keeping your building warm while minimising the heating bill, and ensure your heating, ventilation, and air conditioning set-points are properly controlled to ensure your staff’s comfort, without wasting energy.
Businesses can save considerable cost by becoming more aware of energy usage and evaluating all energy costs wherever possible.
However we cannot pretend there is not going to be a major impact as energy costs rise along with general inflationary increases. This is going to be difficult for all business owners and employees.
One last word. We’ve been there before and in my experience, well-run businesses come through difficult periods even stronger than before.
Peter Done is managing director of Peninsula
