As inflation hits the highest rate in 40 years, how can businesses prepare for the current economic climate?

Businesses across the UK are facing a host of unprecedented challenges, from the cost-of-living crisis to soaring inflation rates – which hit a 40-year high of 9% today. The detrimental effects of this were illustrated in a recent study from Capital One which showed that 71% of business owners’ operations have suffered as a result of inflation in the past three months. These challenges caused the UK economy to shrink by 0.1% in March, alongside the FTSE 100 falling 2% – representing an eight-week low.

Adding to this, yesterday’s ONS report unveiled the staggering finding that for the first time on record, there are now more job vacancies than people unemployed – making it extremely difficult for businesses to recruit and retain talent. The unemployment rate fell to 3.7% between January and March – its lowest for almost 50 years, as job openings rose to a new high of 1.3 million. As a result of this unprecedented business environment, now more than ever companies must have an astute strategy in place to help them weather the storm.

Chris Biggs, Partner at leading accounting and consultancy company, Theta Global Advisors, suggests there are five key strategic areas for businesses to focus on to navigate through challenging times: digital speed, being ready to reinvent, making data-driven decisions, forward-thinking recruitment and retention strategies, and seeking external support.

Digital speed:
As a result of utilising technology to automate process, leading companies reallocate talent and capital four times more quickly than their peers – allowing them to continue the progression of their businesses. The integration of technology is pivotal for any business today, with a study from Finances Online showing that 59% of business owners reported an increase in pick up in existing business alongside 47% stating an improvement in their internal operations because of the adoption of digital solutions within their company.

Be ready to reinvent:
Whilst it is of upmost importance that companies maintain the profitable elements of their operations, continuing in the same way is a dangerous choice. Businesses must invest as much in reassessing and upgrading the core functions of their operations as they are in innovation, usually from harnessing technology.

Making data-driven decisions:
It is widely believed that the road to recovery and progression is paved with data as it provides insight to make better and faster decisions. A study from McKinsey shows that high-performing organisations are three times more likely than others to say their data and analytics initiatives have contributed at least 20% to their earnings before interest and taxes (EBIT).

Forward thinking recruitment and retention strategies:
With a record number of job vacancies in the market, businesses must offer flexible working options to attract and retain talent. A landmark study by Theta Global Advisors unveiled that more than half (57%) of Brits do not want to work in a traditional office environment five days a week putting in regular hours, with 41% stating they’re considering leaving their job in the next year due to insufficient offerings in this area.

Seek external support:
Business advisors have the ability to see a business’ operations with a fresh and expert eye – highlighting potential pitfalls in strategic plans. They can provide invaluable advice on areas such as management, finance operations and marketing. A study from the U.S. Small Business Administration revealed that 70% of small businesses fail by the ten-year mark without an advisor, compared to 70% who continue past ten years with an advisor in place.

Chris Biggs, Partner at Theta Global Advisors – an accounting and consultancy company – comments:

“After inflation hit a staggering 40-year high of 9% today, businesses will inevitably be affected and must prepare accordingly. I think one key option that is often overlooked is enlisting the help of expert, external business support – whether that’s to assess a company’s financial operations or advise on growth strategy. A fresh pair of eyes will often spot issues that those engrained in the day-to-day running of a business will not – and foreseeing potential stumbling blocks in times such as these is a must.

“Another key quality that resilient and successful companies have is the ability to pivot and reinvent in response to external circumstances. It’s very easy to become attached to the same way of working if it has functioned well in the past, but unprecedented times can sometimes call for a different course of action. Taking a step back and assessing where weak points are and where improvements could be made will ensure businesses stay one step ahead.

“I’d also encourage companies to try and automate some of their processes through the use of reliable tech platforms. This enables time and resource to be diverted to strategic planning rather than impeded by daily processes. Finally, in the most competitive market ever for employers – they must now offer forward-thinking flexible work options to ensure the continued recruitment and retention of skilled talent.”