The cost of living crisis in the UK is already having a significant impact on both UK citizens and the economy. Despite recent promises from the Chancellor that support will be made available, the most vulnerable people, as well as the businesses they buy from are likely to suffer in the long term.
The upcoming summer and warmer weather should mitigate some of the impacts on consumer energy bills and the retail and hospitality sectors should benefit from crowds out enjoying the sun. But it is vital that procurement and supply chain businesses brace themselves for a rocky road ahead. Here are some of the current ways that the cost of living crisis will impact procurement and supply chain over the coming months.
What’s causing the cost of living crisis in the UK?
A number of factors contribute to the UK’s cost of living crisis. These include the ongoing impact of the COVID-19 pandemic, the energy price cap lift, national and personal debt, inflation, increases in costs for goods and services and rising taxes. Naturally, there is also the impact of the ongoing war in Ukraine.
How the cost of living crisis will impact the supply chain
Consumers will buy less
UK citizens are weathering a so-called perfect storm of increased outgoing payments and higher prices for goods and services. The NI starting point has been increased to £12,570 a year, councils have been given the all-clear to increase council tax rates and the additional £20 given to benefit claimants each week has been cut. While the personal tax-free allowance will be frozen at £12,570 for the next four years, in real terms UK citizens will pay more over time.
All this means that people will have less to spend in shops, and online. They will scrimp on energy use, decide against expensive holidays, eschew non-essential goods, and so forth.
Costs for transport and logistics will continue to increase
The chancellor announced a 5p cut in fuel duty, but of course, petrol and diesel costs continue to skyrocket.
The Automobile Association’s (AA) 2021 report recorded highs of 126.3 p/litre (petrol) and 129.1 p/litre (diesel). Its latest report in April 2022 revealed The South East has recorded the highest price for unleaded petrol at 163.4 p/litre in the South East and the highest diesel price at 177.4 p/litre in the same area of the country.
Rising energy prices will affect both consumers and businesses
On February 3rd 2022, Ofgem announced that due to record increases in global gas prices the energy Price Cap would increase by 54% from 1st April 2022. This means that UK energy suppliers can increase their maximum prices by that amount. This increase is a result of worldwide wholesale gas shortages which are affecting the energy suppliers’ ability to meet demand.
The energy price cap was introduced to protect the consumer, rather than businesses. However, it has resulted in energy companies passing on their costs to businesses by increasing their business gas and business electricity costs. The impacts can be considerable. In fact, some businesses have received quotes exceeding 70p/kWh. Naturally, this will have an enormous impact on internal operations as well as on the wider supply chain.
As we said at the beginning of this article, the coming months will be a very challenging time for both businesses and consumers. In difficult times, the best approach is to remain cautious and keep ourselves informed. To mitigate risk where possible and to support our employees and those near to us, as well as our customer, clients and the wider community. If you have any challenges that the team at Bramwith can help with, please get in touch.
