Member Article

Why small businesses should be cautiously optimistic regarding latest UK inflation figures.

The positive Inflation news last week was met with a sense of scepticism by many including some business owners. We were told that UK inflation had dropped to 8.7%. It was the first time that it had dropped below 10% in 10 months. One would think that business owners should be jumping for joy and could sigh with relief. However, food inflation remains worryingly high at 19.1% and unless this starts to fall dramatically business owners will still see consumer spending hampered.

Our coaching team has supported many hundreds of London entrepreneurs to grow their businesses for over 15 years. During that time we’ve ridden some highs and lows alongside them. Having spoken to our clients we feel cautiously optimistic about the future. However, the businesses and entrepreneurs that we coach have been through tough times financially and emotionally with the pandemic, Brexit and the subsequent cost of living crisis. They have seen a rise in business rates also. There are reports from our clients that the demands for wage increases, at around 5% to 10% across all levels of the workforce, have caused them to either lose money or stall. In some cases the wage increases are at an unprecedented 25% - these businesses have been forced to make these increases or lose talented people to competitors.

We work throughout many sectors but a lot of our work is within the construction, architecture and related sectors. A major impact has been the projects of all sizes suddenly placed on hold, putting considerable extra pressure on already stretched company cash flows following the Pandemic, as well as stress for leaders having to manage huge uncertainty.

All these factors have taken their toll on the UK’s small businesses. Many of the projects on hold remain on hold or have been cancelled. The hope is that the wheels will start turning again and gather momentum. The effect that those projects stalling has had on leaders is massive. They have had to let staff go and streamline businesses. This has caused them to make difficult decisions with far reaching consequences. The personal impact on business leaders also need to be addressed.

On a positive note, the latest inflation figures will be a trigger for greater stability and confidence in the construction and related sectors which will lead to more projects restarting. This will help with company cash flow and ease financial pressures that they are facing including the cost of materials which we hope to see stabilise. Another reason for optimism is that several firms that we are coaching are now reporting an increased number of new enquiries for their businesses.

What needs to happen next for the UK’s small businesses? Irrespective of whether you think these latest figures are good for you or make no difference at all - you should be proactive with your marketing. It is so important to be as visible as you can be as the market place picks up so you can seize the opportunities that are coming through. A number of businesses we are working with are now starting to lean into AI. They are more open and curious to explore how it could help them to delegate and outsource many tasks in their business.

The UK’s small businesses must continue to adapt, learn and maintain belief in what we have the ability to control within our businesses. That is the most impactful use of time and headspace, rather than focusing on external factors over which you have no control. We should always seek to improve the way we run our businesses in such a fast-moving landscape, in fact it’s essential. I think it is important that we are cautiously optimistic with these latest figures but potentially the future is looking brighter.

This article was written by Parag Prasad, who is the Founder of a multi award winning Business Coaching practice in Central London with over 15 years experience helping entrepreneurs run & grow successful businesses.

This was posted in Bdaily's Members' News section by Lucy Hood .