How global economic changes might affect your business

Overview

The huge level of uncertainty globally, but in particular, in respect of the ongoing conflict in Ukraine: Isolationist policies coming out of the new US administration including the levying of trade tariffs make for sobering reflection.

Whilst the US has avoided applying blanket punitive tariffs on the UK it is widely thought that exports of Steel and Aluminium will be subject to aggressive tariffs in the coming months.

Growth

Although the new the UK administration has stated that growth is the solution to our failing economy, the most up to date forecasts suggests a continued period of flatlining through to the end of this parliament. This applies as much to the rest of Europe as the UK.

Interest Rates

Further cuts in UK interest rates are likely to trickle through over the next twelve to eighteen months (neatly described by Ian Duff as taking the foot off the brakes but not exactly applying the accelerator)

Inflation

Remains stubborn as increases in water bills, council tax and energy costs are set to rise significantly in the coming months.

We saw food deflation in the third quarter of last year however this has now reversed and modest increases in food prices are expected in the coming months

Economic issues particularly effecting service businesses (hospitality in particular

No let-up in the economic pressure hospitality businesses have endured over an extensive period. Recruiting remains challenging as does the cost of retaining staff, increases in the living wage and employer NICS will bring more pressure to bear on already stressed overhead costs leaving operators with the perennial dilemma “do we increase our charges and potentially compromise business activity or absorb even more costs into our margins”.

Summary

Whilst we have, at last, got the COVID years and all of the challenges that came with it in the rear-view mirror, we continue to experience significant levels of economic and political uncertainty.

Hospitality businesses need to remain focussed on providing exceptional levels of customer satisfaction whilst focussing on driving productivity through investment in high quality and well-trained workforce.

The Author:

Paul Hayhoe

Senior Fellow Member, Association of  Accounting Technicians (FAAT)

Paul qualified as an accounting technician (AAT) in 2005 and as a Licensed Member in Practice, his work is regulated on an annual basis through the AAT.

Paul is a hospitality industry insider with hands-on experience of the challenges and joys of running a hospitality business. He’s also very much a people person who pulls out all the stops to ensure his clients’ success.