When researching for this article, I came across Ha-Joon Chang, an economist, author, and professor who is committed to simplifying economics for everyone’s understanding.
Chang likens modern economics to the catholic theology in medieval Europe, where only the privileged had access to the language, and therefore debate regarding the subject. He said:
Once you create this body of knowledge that is not accessible to other people, you can pull the other people into accepting your argument, because other people cannot really understand you.
In this article, we break down the impact of inflation, and provide a few resources to help business owners face this crisis.
Table of Contents
What is inflation?
Inflation is the price increase of items over a period of time.
It is calculated by monitoring the price of every-day use, usually household, items.
Covid, the climate crisis, and most recently, the war in Ukraine, have caused inflation to grow five times more than the Government’s target to keep inflation rates at 2%.
Who's affected by inflation?
Unless privy to the privilege mentioned above, inflation affects people from all walks of life, particularly those already affected by societal barriers.
This trend is seen most clearly with the stark difference in price increase of products aimed towards a feminine or masculine consumer.
The cost of living and inflation crisis is expected to mostly affect those already impeded by societal barriers that impact their economic (in)stability, ie.
- lower income households
- those of marginalised genders
- people from underrepresented ethnic backgrounds
- people with disabilities
What does this mean for business owners?
With the rise of price of goods, consumers will likely think twice before spending their money on “luxury” goods. Meaning, anything that they don’t necessarily need.
With less ‘impulse buying’ these consumers will be doing more research to weigh up their options before making a purchase.
To appeal to these consumers, make sure you’re staying ahead of the curb by making yourself as visible as possible and keeping up to date with business trends.
What’s being done about it?
The Prime Minister, Rishi Sunak, held a speech at the beginning of this month to discuss his new year’s resolutions for this country.
His five pledges were:
- To halve inflation
- To grow the economy
- To reduce national debt
- To cut (NHS) waiting lists
- And to “stop the boats”
Steering away from the last point to maintain the focus on inflation, I’ll instead refer to the following resources for some extra reading:
- The Guardian: Most people who risk Channel boat crossings are refugees – report
- British Red Cross: Several articles debunking common myths about the channel crossing.
For the remainder of the goals, growing a stronger economy is the ultimate goal.
Without entrepreneurship, this would be impossible.
It was great so see acknowledgment of this from the Prime Minister, who said:
Over the last 50 years, [innovation] was responsible for around half of the UK’s productivity increase. The more we innovate, the more we grow.
Sunak claims to be making space for innovative entrepreneurs already, with last year’s Autumn Statement.
There does, however, seem to be a disappointing lack of clarity in how these commitments are to be achieved.
Where the Government actually do have sway, such as with Research and Development spending, certain changes to the scheme don’t seem to align with its commitment to innovation.
While the Government has committed to the increase of public funding for R&D to £20 billion a year by 2024-25, the chancellor also announced significant cuts to R&D tax credits for smaller companies.
This coming April, the credit for companies claiming through the SME scheme will be reduced from 33.35% to 18.6%.
These changes show a continuing preference for big corporations over small businesses, which is a definite loss for innovation.
What can we do about it?
The main thing we can do as individuals and organisations is combat the inequity crisis tied with inflation and continue to build greater social awareness
This is something we as an organisation are committed to doing more of, which will often take shape in articles such as this, press responses, and increasing our support for organisations whose values we align with.
As a society, we’ll see this social awareness growing through the efforts of research-focused civil society groups, public and policymakers, and advocacy-focused organizations, all dedicated to building an equitable world.
What can business owners do in the face of rising inflation?
Thankfully, there are several resources available to business owners to help with rising inflation and the cost of living crisis.
Federation of Small Businesses (FSB), for example, has many resources for small business owners, such as how to tackle inflation as small business.
In this article, FSB outlines some steps small businesses can take to alleviate the financial pressure in the face of the cost of living crisis, most notably:
1. Build a business plan.
This plan would include a cash flow plan in the face of financial threats to ensure your business continues to work towards growth, even in uncertain times such as these.
2. Deal with rising costs
Find alternative ways to balance profit margins, such as increasing the automation of processes, and improving your energy efficiency, so that you aren’t reliant on continuously rising prices over the level of inflation.
3. Explore different finance options
FSB recommends looking into alternative finance options such as open banking for loans, trade finance, invoice finance, and more, to help fund financial gaps and increase your business’s resilience in the face of oncoming changes.
Other FSB resources include:
Similarly, Business in the Community has a Cost-of-Living Action Plan for Businesses, which is a downloadable 12 step action plan for business owners facing the cost of living crisis.
See their cost of living crisis in number break-down:
BITC say that, with the right response to this crisis, businesses will be able to:
- Build trust with employees and contractors in a time of uncertainty
- Improve business and community resilience
- Create a competitive advantage by adapting quickly towards the changing market conditions
- Improve stakeholders’ view of their brand
This plan includes so many incredibly useful resources, not only for your business, such as helping future-proof your business, but also in aiding your support for employees in incredibly challenging and complex situations.
As previously mentioned, we are dedicated to tackling societal inequity, particularly in the entrepreneurial world.
See why, and how, we plan to foster change in an unequal world.
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