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Surviving The Perfect Storm

Surviving the Perfect Storm
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by
Managing Director

Owning and running a business has always come with its share of stresses and pressures. Typically, these remain the same: cash flow, business development, and staffing. 2022 though, sees more of these pressures than we’ve experienced in a while. The question is, how do we ride out this storm?

Owning and running a business has always come with its share of stresses and pressures. Typically, these remain the same: cashflow, business development, and staffing. 2022 though, sees more of these pressures than we’ve experienced in a while. The question is, how do we ride out this storm?

Let’s examine the present challenges:

  • Staff shortages
  • Cost of living rise
  • NI insurance contributions rise
  • Energy price hike
  • Inflation

 

… and all at the same time whilst we’re coming out of a pandemic and now feeling the effects of the war in Ukraine. It’s truly a perfect storm.

The UK was facing skills shortages in critical areas even before Brexit which in turn triggered a downturn in the influx of workers from the continent. Care, Retail, and Hospitality sectors saw this significant effect and were compounded in during the summer months when seasonal workers, particularly in Catering and Agriculture stayed away from the UK. Then, the pandemic hit, the lockdown was ordered, and huge numbers of the working population stayed home, tidied their gardens, spring cleaned their homes, read books, and spent time with their spouses and children. Had this continued for a mere 3 or 4 months, workers would probably have quite quickly returned to their previous working lives with perhaps only initial disgruntlement. However, repeated bouts of ‘work from home’ and furlough over the course of some twenty months have led to a shift in the worker psyche. We touched on this in our previous blog, “The World Is Short Staffed”. Now, workers see the benefits of working from home and are resisting returning to working from a single office location, particularly on a full-time basis. Some have re-evaluated their working lives and changed careers to pursue a better work/life balance. This has affected workers at all levels, from waiting staff and carers through to boardrooms. Consequently, businesses throughout the economy are feeling the effects.

Added to this, everything is now significantly more expensive than it was two years ago and has been much publicised, and inflation is running at its highest rate in thirty years.

The Consumer Prices Index (CPI) rose by 6.2% in the 12 months to February 2022, up from 5.5% to January. This is the highest CPI 12-month inflation rate in the National Statistic series which began in January 1997, and the highest rate in the historic modelled series since March 1992, when it stood at 7.1%.

~ Office for National Statistics

Fuel prices have soared - The RAC noted an 11p rise in petrol and a 22p rise in diesel in March alone. Given that 68% of UK workers commute by car, this presents an immediate wallet crunch for them. Ditching the car in favour of public transport isn't necessarily cheaper as regulated rail fares have risen by 3.8% in England and Wales (the highest for nine years). Energy prices have nearly doubled for some consumers, and water rates are rising. These rises impact businesses in a number of ways: it’s now significantly more expensive for everyone, business owners and employees alike, to get to work unless they walk or cycle. It’s also more expensive for businesses to keep the lights on, the offices heated and the water running. The cost of food is also rising. Wages are not keeping pace with the upturn in the cost of living, and this has a knock-on effect out of the office. Staff worrying about how they’re going to get to work for the final week of the month or deciding on whether to eat properly or heat their homes are unlikely to be performing at their best. If they feel their employer is unsympathetic, they’re unlikely to stay.

Raising salaries might appear the solution, but many businesses are still finding their feet again following months of lockdowns and simply don’t have the financial resilience to hand out pay hikes. The increase in employers' National Insurance Contributions is also taking its toll. Add into that the government’s rollback of reduced VAT rates for some sectors and the squeeze is all-round. And finally, Bounce Back Loans need repaying – a new additional expense for many. In fact, in a survey by the Chartered Management Institute, 48% of businesses were not planning on giving any pay rises this year, and of those who were planning pay rises, the average was just 2.8%.  And they're the lucky ones: a poll by ACAS shows 18% of employers expect to reduce their headcount by March 2023. 

What can be done?

Keeping staff has never been more important. Put a robust Employee Engagement policy in place if you haven’t already. Hybrid or flexible working is also high on the list of desirable qualities in a role, as is the opportunity to develop new skills. These may not all be practical options for every type of business; a waiter cannot perform their role remotely, however, if their issue is they’ve become overwhelmed by having to deal with front-of-house situations, would they consider retraining for a chef role? It is better to keep a good worker and retrain than to lose their skills and loyalty completely. Staff shortages are a serious issue: 78% of workers experienced some form of burnout since the start of the year. Consider offering access to Employee Wellbeing programmes, and introducing a perks scheme that focuses on improving employees’ quality of life, such as subsidised gym memberships or private healthcare. These types of benefits have become more valued than ever before. Courses on managing cash flow, one-to-one sessions with financial planners or wealth managers to help workers with their individual financial challenges, manage their debt and form a plan to take the stress off their shoulders can all go a long way when it comes to retaining staff.

Putting measures in place to retain their staff is an excellent economy for businesses. The cost of recruiting and onboarding a new member of staff, in terms of lost productivity and loss of time from those conducting the process, is significant. Working with an HR Consultancy to design a robust Employee Engagement programme that works for your team could be viewed as an investment in this case. They should also be able to advise on how to manage staff morale and catch any stress points before they rupture. And if staff do leave, reduce the amount of time you spend on finding new team members by using a recruitment agency capable of doing the hunting, sifting, and interviewing on your behalf and that will present you with only a handful of top-quality candidates.

It might also be a good time to get a business coach. As business owners, we tend to think we know what we’re going through, but these are unprecedented times. Business processes could be streamlined, new avenues of income identified, and action plans put in place. A fresh set of eyes on the situation can often help us see the wood for the trees.  

Engage with the Accountant to see how the business can reduce costs and maximise revenue. It could be there are loan breaks or new government incentives that can help limit the impact of the current financial burden – your Accountant should know.

We all went into business for ourselves to build something we deemed worthwhile, something we could be proud of. We have a responsibility to our staff, our families, and to ourselves, to do everything we can to survive this storm. Now is the time to get smarter and sharper in all business areas so we can get over this next hurdle and continue contributing to our local economies.

ASL Recruitment was established in 1999 and has been serving Hastings and the surrounding area ever since placing temporary and permanent roles across a variety of sectors including Industrial and Manufacturing, Legal, Finance, Marketing, Technology and Office Support, from junior up to board level. Our co-founder and Managing Director, Jason Perry is an HR specialist and a Chartered Fellow of the Chartered Institute of Personnel and Development. For further information on our recruitment or consultancy services, email  hastings@aslgroup.co.uk or call us on 01424 452999.