The industries hit the hardest by the rising cost of business

The experts at money.co.uk bank accounts have analysed how different UK industries have been impacted by the rising price of goods and services between September 2022 and August 2023.

Accommodation and food services, wholesale and retail trade and construction ranked as the worst-affected industries, with more than two in five businesses from each industry reporting feeling the pinch.

The UK industries most affected by the rising cost of business:

Rank	Industry	Average businesses whose price of goods/services increased (Sept 2022 – Aug 2023)
1	Accommodation and food service activities	63.6%
2	Wholesale and retail trade; repair of motor vehicles and motorcycles	45.8%
3	Construction	43.6%
4	Manufacturing	36.4%
5	Other service activities	33.9%
6	Human health and social work activities	33.2%
7	Real estate activities	32.9%
8	Administrative and support service activities	30.8%
9	Arts, entertainment and recreation	28.4%
10	Transportation and storage	27.4%

1. Accommodation and food service activities (63.6%)

This sector was most affected by price increases, with almost two in three (63%) finding that their prices had increased. It’s unsurprising, given the challenges this industry faced during the pandemic and the subsequent recovery. It’s also been affected by increases in global commodity prices due to higher energy prices, supply chain disruption, and the Russian invasion of Ukraine.

2. Wholesale and retail trade; repair of motor vehicles and motorcycles (45.8%)

Nearly half of the businesses in this industry reported price increases. This sector has been affected by increases in the price of fuel, as well as components. Both of these were still struggling to recover from the pandemic before being compounded by the war in Ukraine.

3. Construction (43.6%)

In the construction sector, an average of 43% of businesses say that their prices have gone up over the last year. Materials such as bricks and concrete have been in short supply, which has driven prices up, although there have been signs of recovery in recent months.

Cameron Jaques, business expert at money.co.uk bank accounts, reveals his tips for how businesses can adapt: “With rising costs and soaring interest rates, it’s vital that businesses innovate and adapt where they can but also seek help and support to ensure they remain profitable. Here are some things you can do:

• Re-evaluate supply chains: Sourcing materials and goods locally can reduce shipping costs, shorten delivery times, and support the local economy. It also lowers the dependency on international suppliers, which might also be affected by current events. Exploring alternative materials that are cheaper or more readily available can also lead to cost savings. It’s essential to ensure that the quality of the end product remains consistent.
• Energy efficiency: Conducting energy audits to identify wastage and implementing energy-saving measures can lead to significant cost savings over time. Investing in renewable energy sources like solar or wind power can also reduce energy bills in the long run.
• Technology and automation: Automating routine and repetitive tasks can free up employees’ time for more value-added activities, improving overall productivity and reducing labour costs. Employing digital tools to optimise operations, enhance customer experiences, and make data-driven decisions can also lead to better profitability.
• Price adjustments: If price adjustments are necessary, communicating transparently with customers about the reasons for the increase can help maintain trust. Offering added value, such as enhanced service levels or loyalty programs, can help mitigate potential adverse reactions to price increases.
• Budgeting: Regularly reviewing and adjusting budgets to reflect current economic conditions and business operations is crucial. Performing cost-benefit analyses for different areas of spending can help in identifying where cuts can be made without impacting the quality of goods or services.
• Diversification: Exploring new markets or creating additional revenue streams through product diversification can help mitigate risks associated with economic downturns. Effective cross-selling and up-selling strategies can increase the average transaction value and improve the bottom line.
• Professional advice: Consult financial advisers to understand the economic landscape and make informed decisions. Explore available government grants, subsidies, or low-interest loans to support businesses during challenging economic times.
• Staff training & development: Training staff to take on multiple roles or to use new technologies can improve efficiency and adaptability. Engaging employees in cost-saving initiatives and rewarding cost-saving suggestions can foster a culture of continuous improvement.

Full Rising Cost of Doing Business Report here.

08/11/2023