Is your business sensitive to inflation?

The latest figures from the Office for National Statistics (ONS) reveal that the UK’s economy grew by 0.5% between April and June, a slight dip from the initial estimate of 0.6%.

This adjustment, largely due to sharper-than-expected declines in the manufacturing and construction sectors, comes at a pivotal moment as the Labour government gears up to unveil its first Budget at the end of the month.

Firstly, let’s talk about manufacturing and construction. The production of transport equipment, particularly cars, saw a significant drop of 3.1%. According to the ONS, it seems that many car manufacturers are reducing output in preparation for a shift to electric vehicles. For businesses involved in these sectors, this may be a crucial moment to consider strategies carefully and consider investing in technology that aligns with future trends.

On the construction front, while reporting a continuing decline in building new homes, ONS said there are some signs this is beginning to ease. If you're in the construction business, this may offer some positive news for coming months.

Interestingly, households are saving more, with the saving ratio climbing to 10% in the spring. While that might sound positive, it can lead to less consumer spending, particularly on non-essential items.

Looking ahead, there’s also the question of interest rates. The recent downward revision in growth figures may further support that the Bank of England made the right call in cutting the base rate in August. It may make a further rate cut in November more likely.

So, what could this mean for your business?

How much these latest figures might affect the upcoming Budget is uncertain, however they do highlight the need for businesses to remain flexible and proactive.

• Ensure you review your financial data regularly, compare performance to your plan and manage liquidity (solvency) proactively
• How sensitive is your cashflow if buying trends change?
• If possible, increase your prices to compensate you for fluctuations / protect your margins
• Look at how you finance your business, and consider consulting a broker
• Always be vigilent in respect of operational effectiveness, and be prepared to invest in order to future-proof your business
• If your business relies heavily on discretionary consumer spend, think about how you can add value - perhaps through loyalty programs or personalised marketing.

If you would like personalised advice for your business, please just get in touch. We would be happy to offer you a free consultation.