UK firms cautious due to cost-of-living crisis

Consumer set to face passed-on extra expenses as companies try to rebound

Inflation is hitting British businesses, with some fearing that rising energy costs and inflation could hamper COVID-19 recovery as well as passing on costs to the consumer.

According to the Office of National Statistics, the Consumer Prices Index, or CPI, rose by 5.5 percent in the 12 months to January 2022, up from 5.4 percent in December 2021.

Victor Ravdive, CEO and executive chef at Piazza Italiana based in the City of London, said the rise in goods has been dramatic and inflation has pushed up his utility and operational costs, forcing his restaurant to raise prices.

"This will affect our customer base and guests. Also, during this crisis, not everyone will be financially stable as they were two years ago, so we are seeing less people spending money and less people out consuming alcohol compared to a couple years ago," Ravdive said.

He worries that if inflation continues to soar, his business will not be able to recover all the costs.

Ravdive said he cannot pass on all the increased costs to the consumer and it is much harder to raise prices that would absorb costs.

Along with the soaring inflation, businesses are also faced with staff shortages, even as many employers have increased wages to avoid losing staff. Ravdive wants the government to relax rules on hiring overseas workers to help with the hospitality industry in the United Kingdom.

Chris Joseph, co-founder of Romulo cafe and restaurant in London, said they have already lost revenue during government-imposed lockdowns to help curb the pandemic as well as being hit by rising supply chain costs.

"We expect the pressures of the effects of rising inflation rates and energy costs to force us to increase our prices," Joseph said. "The challenge we are addressing in anticipation of this is being able to clearly communicate our brand promise that differentiates us from all the rest and makes us the place you want to go back to time and again."

With rising bills, Joseph now fears another lockdown which will add to the company's woes, but he said the industry has learnt to adapt to sudden changes.

"We overcame the challenges of the last lockdown and we are a lot smarter for that. We discovered how we could become more relevant to our guests by continuing to look at signature meals prepared at home and developing a complete line of baked goods, together with some other initiatives in the development pipeline that will allow us to take leadership in our market segment," he said.

Joseph feels the government should support the industry more by rolling back the VAT rate and lowering businesses rates, even if it is on a short-term basis. "We think this will give us enough time to recover and actually build our sales so we will in effect be paying more taxes," Joseph said.

"Returning to previous VAT rates too soon will force many businesses to raise prices just as consumers are regaining their confidence in the market. The bottom line is that the rate of inflation and rising energy costs will directly affect the consumer. We need a vibrant consumer market for a successful national economy. These two are not mutually exclusive."