Are you ready for the coming storm?
Nobody likes getting called into the boss’s office for a telling off but it might be worse if your boss is the government.
This week the chancellor will meet with the Competitions and Markets Authority (CMA) along with Ofgem, Ofwat and Ofcom to discuss potential profiteering issues in their sectors and their response to it or lack of it.
This is after the Bank of England suggested that some retailers were increasing prices or failing to pass on lower costs to consumers as a way of increasing profit margins.
This was denied by the British Retail Consortium (BRC) saying that there had been a “regular stream of price cuts” by supermarkets despite “extremely tight” profit margins.
However, it is against the backdrop of two additional significant events that took place in the past week.
Firstly, the headline consumer price index measure of inflation remained at 8.7%, still way above the Bank of England’s government mandated target of 2%.
Based on this evidence, the bank’s monetary policy committee then raised interest rates for the 14th consecutive month by half a percentage point to 5% – which is the highest level they’ve been at in 15 years.
Financial markets and analysts are also predicting further rises during the second half of 2023 expecting interest rates to climb to 6% by the end of the year.
Andrew Bailey, the governor of the Bank of England, denied that the Bank of England was actively looking to trigger a recession and still insists that he thinks that inflation will “come down markedly” this year but reiterated: “We’ve got an economy that is much stronger and more resilient than we expected it to be.
“We’re not expecting or desiring a recession but we will do what is necessary to bring inflation down to target.”
Chris Horner, insolvency director with BusinessRescueExpert said: “Interest rates are being raised in a direct attempt to try to reduce inflation. The theory is that if borrowing is made more expensive, people and businesses will spend less which in turn will bring the inflation rate down as the economy cools off.
“Now the price of goods and services as well as wage rates will be key signifiers here and if they don’t reduce in the next few months along with the headline rate of inflation then expect to see some additional rate hikes.
“What is certain is that further tightening of financial conditions will take its toll on economic activity and will raise the risk of a recession – which is two consecutive quarters of negative economic growth.
“For business owners and directors of small, medium and micro businesses, a recession would be the icing on a particularly nasty cake.”
During these hot summer months, it’s not unusual for a thunderstorm to pop up now and again.
One of the things that is unusual about them is how you can literally sense when one is about to arrive, the very air itself changes and you start to make immediate changes like taking the washing in and making sure that nothing remaining outside will be damaged.
It’s the same with tough economic times. When you’ve seen enough of them then you can sense when one is just around the corner and with all the indications we’ve seen in the past week, we think that the next six months will be just as hard for businesses as the first half of the year, if not even tougher.
This is why it’s vital to know exactly what your strategy is going to be in this critical time.
We offer a free initial consultation to any director or business owner who wants to find out what they can do to prepare their business for the choppy waters ahead.
We’ll be able to let them know what options they have to protect their business from creditors, using this legal protection to help them take stock and rebuild.
Or if the obstacles facing the business are too high to get over then we’ll talk about what the quickest and easiest ways to close the business are.
No matter what the unique circumstances facing your business are, you’ll be able to find a solution – all you have to do is get in touch with us first.