Are you prepared for inflation?

Last month it was announced that the Consumer Price Index (CPI) 12-month rate had risen to 2.9 per cent in May 2017, up from 2.7 per cent in April and well above the government’s target of two per cent. For the average consumer, this means that the price of food, utilities and clothing has just gone up, while their savings are worth a little bit less than they were before. For the UK’s estimated 5.4 million SMEs, it means higher bills and diminished buying power, as well as an increasingly uncertain long-term outlook.

Earlier this year, Barclays research found 59 per cent of the UK’s small businesses had not prepared for inflationary pressures. Yet in the year ending 31 March 2017, SME operating costs had risen by 3.2 per cent.

For many smaller businesses, 3.2 per cent is well above the margin for error, and if inflationary costs have not been factored into the annual budget, they can have a devastating effect on the books. According to Mike Cherry, the national chairman of the Federation of Small Businesses (FSB), these miscalculations have forced some small business owners to personally cover the costs.

“Operating costs for small firms are now at their highest in four years,” said the FSB’s Cherry. “Small business owners and their staff are having to personally absorb these hikes and have less and less room to invest for growth. Support is urgently needed.”

For some SMEs, alternative funding can offer a lifeline in times of uncertainty. 

According to recent analysis by the Asset Based Finance Association (ABFA), an average of £9.5bn was lent to SMEs using either invoice finance or asset-based lending products in 2016, a three per cent increase on the previous year. At the same time, SME reliance on bank overdrafts fell by two per cent, suggesting that business owners are becoming more open to non-traditional financing options as their margins tighten.

If you’d like to find out more about alternative business finance facilities, we’d love to be able to help. Why not give Regency a ring today on 0161 280 4010, drop us an email at lynnew@regencyfactors.com or browse our website for more details on how our facilities work.