In a small bit of good news, March’s inflation figures have been released showing a drop to 2.6% from 2.8% in February. The main reason? Lower petrol prices, which has offered some relief for households and businesses alike.
However, April has brought fresh challenges. Wage costs and energy prices have already increased, and that’s expected to feed into higher costs in the coming months. The Bank of England’s last forecast showed that they expect inflation to rise again - potentially reaching 3.7% - and to stay above its 2% target until the end of 2027.
The next big date for your diary is 8 May 2025, when the Bank of England will announce whether interest rates are going up, down, or staying put. What does all of this mean for your business planning?
What to watch as a business owner
Even though inflation dipped in March, the picture ahead is more uncertain. Here are a few ways to stay on the front foot:
1. Rising costs could squeeze margins
Now could be a good time to:
· Look into fixed-rate energy deals if they are available.
· Consider if there are any ways that you could be more energy efficient.
· Speak with suppliers or landlords about cost-sharing opportunities.
2. Customers may be price-sensitive
If your costs are rising, many of your customers will be feeling the squeeze too. A smart pricing strategy will help you stay competitive without undercutting your margins:
· Consider tiered pricing or flexible packages.
· Emphasise the value of your products or services rather than just the price.
· Keep communication open with your customer base so you understand their needs. This will help you to know how to respond.
3. Interest rates remain a key factor
While there was an expectation that interest rates would see more cuts during 2025, this is now uncertain. Therefore, you should continue to monitor your borrowing costs, and factor potential interest rate changes into any investment decisions you are planning.
4. Staffing and wages
With living costs staying high, staff who did not receive the increase for minimum wage workers may begin looking for pay rises. If you're not in a position to match inflation, consider other ways you can support and keep your staff. For instance, you may be able to:
· Offer flexible hours or hybrid working options.
· Provide training or upskilling opportunities.
· Show appreciation through small perks or recognition.
Stay agile, stay informed
While the dip in March inflation is welcome, it’s not a signal that everything’s cooling down. With inflation likely to rise again, it's wise to build flexibility into your business plans.
Keep an eye on the Bank of England’s interest rate decision on 8 May. It could offer more clues about where the economy - and your costs - are headed next.
If you'd like tailored advice for your business or help adapting your plans, just shout. We’re here to help however we can.
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