Finally, some positive economic news!
Inflation in the UK fell in August for the third month in a row to 6.7%, down from a high of 11.1% in October 2022. And it’s forecast to continue falling to around 5% by the end of this year.
What’s more, weekly earnings (excluding bonuses) grew by 7.8% in the three months to July 2023. That means that wages are rising faster than prices for the first time since October 2021.
After many months of worrying about galloping inflation, this should come as a relief to consumers. Perhaps you’ve already noticed the difference in your grocery bills and spending power.
But what does it mean to you as a business owner?
First, it’s important to understand that this change matters.
We spend a lot of time worrying about inflation when it goes up, and adjusting our business strategy accordingly.
People tend to worry a lot less about falling inflation, but this can change your business environment every bit as much!
So if your business is to function optimally, you have to be responsive to that too. Doing nothing may leave you vulnerable or you may miss important opportunities.
For example, for many businesses, this will be the last chance to raise prices for a while.
Right now, many consumers still perceive that inflation is high and have not noticed how fast it’s falling. So they tend to accept price rises. But try raising prices in a few months’ time, once the fall in inflation is difficult to ignore, and you might get pushback.
This is the right time to examine your pricing structure to ensure it makes sense and that you’re comfortable with what you’re charging.
Consumer behaviour may also change as the ‘cost of living crisis’ abates. It’s likely that over time, people might become less cautious about how much they spend – or what they spend on. But it’s equally likely we might see this change in some customer groups but not others…
Or take investment. As the cost of borrowing drops, this might also be a better time to for external funding if you need it.
Depending on your business, lower inflation can have many other implications.
If you’re going to ride this wave, you need to understand what these might be. Do not make any assumptions, and do not just watch what other companies are doing. The price rises that you need to implement or the way your customers’ behaviour changes, for example, could be very different to the company next door.
This requires a bespoke approach.
That’s where we can help.
At Insights Associates, we help you understand where your company stands financially, so you have a clear picture of your true financial situation. (Without accurate, timely financial information, many company owners get this wrong…)
But we also help you understand what might happen next, so you can make better decisions for your future.
This includes continually analysing changes in your external environment, like inflation, interest rates, exchange rates and regulatory changes, to see how they might impact you.
This isn’t a general exercise. We look at your specific circumstances and your real numbers to provide realistic scenarios and tailored advice.
Instead of relying on gut instinct and guess-work, you’ll be able to make confident decisions with real data behind you.
To find out more about our outsourced financial management, get in touch with me today. Simply email or call us on 01279 647 447 for a no-obligation chat.