What does the rising cost of living mean for businesses big and small?

All you need to know about how the cost-of-living increases could impact your business

Prices are rising, and it’s not just consumers feeling the pinch.

With many companies still recovering from the hit of reduced operations over the past couple of years, and with global inflation set to rise between 4.5-7.7% this year alone, businesses are battling everyday costs too.

From increasing energy bills to rising fuel prices, many organisations are feeling stretched. So, we’ve pulled together a list to give you a one-stop-shop for the costs you need to keep an eye on over the coming year.

Inflations on the rise

With prices creeping up year-on-year, inflation is nothing new. But with the exponential growth we’re seeing, it needs to become a bigger consideration when budgeting and setting the price for your product or services.

Everything from electricity to office rent is on the rise, which means tough decisions for many businesses when it comes to deciding where to cut costs.

Plus, consumers are changing their spending habits, with trends showing they’re generally making fewer non-essential purchases to off-set the rising cost of living. So, organisations aren’t only facing the rising costs themselves, they’re also managing prices to ensure their goods or services remain affordable to create a steady cashflow and profit.

Fuel prices and energy bills are shooting up

People love to see prices drop, but the same can’t be said when they steadily increase – let alone jump up. And recent global developments have seen governments across Europe phasing out Russian oil and energy prices spike. Plus, since many companies have now welcomed colleagues back into the office, your decisions to make the most of a collaborative workspace or keep energy bills down are more important than ever.

But this isn’t the sole reason for the rise in energy costs. We’re also seeing bills soar following increased wholesale costs. While bills for customers have been capped in most European countries, you may find yourself facing bills that are sometimes double or triple the size. Bringing about another challenge for your business to consider, and greater reason to cut costs to ensure you can cover higher invoices.

For many smaller to mid-size businesses, fuel is a huge expense to consider too. From supply to deliveries; overheads to staff travel; the increase in fuel prices can have a knock-on effect on the way products and services are priced. But businesses without their own fuel costs may still be hit with higher bills from suppliers, as their expenditure increases too. So, when you’re budgeting, make sure to keep this in mind.

Keeping employees engaged and on board

With the Great Resignation well underway, many employees across Europe are on the move in search of better jobs. And, from a cost perspective, this has great potential to impact business expenses further. In a competitive job market, it’s taking many companies longer to find and secure top talent, leading to greater cost implications while a role is unfilled, and more time and money spent while training new staff.

Another side of this is that businesses also need to put more cash into their setup and benefit options upfront, to create a desirable environment for staff to thrive in. After all, employees’ expectations have changed drastically in recent years. Unsatisfactory working conditions, uninspiring jobs, and uncompetitive pay is pushing many employees to seek employment elsewhere.

The increase in costs is impacting businesses across Europe, and it’s affecting employees too. So, there has never been a more important time to focus on staff retention – particularly as investing in your team is much more cost effective than hiring fresh talent.

Positive change is coming

We know this is a lot to take in and consider, but change is coming. While governments across Europe are managing the crisis in different ways, with some providing businesses with access to EU funding, there are also steps you can take to ensure smooth, successful continuity of operations.