The perfect storm that looks set to engulf us all - Rashmi Dube

A perfect storm is engulfing us, one where both the cost of business and the cost of living are increasing.

The cost of living is on the rise.

The name of the storm – stagnation. Furlough has ended. We are told that the fuel shortage is being rectified, but the shortage of drivers continues, grocery stores have shelves becoming bare, and coming out of the shadows, as anticipated but not wanted by many businesses, there are rises in tax to pay for the impact of Covid.

The cost of living is also on the rise and will impact consumers and businesses alike. A crunch point will come and all it will do is choke off economic recovery.

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The hit of stagnation, when you have flat economic activity with accelerating prices, means as a business you need to raise your costs, but many households will have to pull back on what they are spending. Their incomes are squeezed.

Energy companies including Igloo, Symbio, and Enstroga have all gone into insolvency. The pressure is only just starting and unless contained, will hit a point of eruption. One could believe that this is a rare and unusual set of circumstances.

Perhaps circumstances that could not have predicted so many energy companies falling into insolvency? Yet, this is not a new issue or something that was unexpected. This was something that could easily be predicted as far back as 2019, where we saw a number of companies fall into insolvency, including Eversmart along with Solarplicity, and Brilliant Energy.

From 2016 to September 13, 2019, 13 energy companies had fallen into insolvency. The business model with the caps placed upon them is not sustainable. Yet we continue travelling along this road, perhaps in hope that no further difficulties or diversions will occur. A naïve approach one may say.

The push will be felt by households, with increases in prices for energy, deliveries, fuel, and food. They will have no option but to cut back, so what of growth?

Under those set of circumstances, the growth of the economy and the survival of businesses and communities will be pushed so far back that it will take a much longer period of time to recover.

However, if we can as writers, CEOs and business owners predict this now, why is there not some form of help to either slow the inevitable process down or to find an alternative route to recovery? I am not saying I have the answers.

All I have, like many other directors or consumers, is a bag full of more questions and a quiet bubbling of anger borne out of frustration, exhaustion and a desire for a better world.

If businesses are going to be paying more, it is unlikely that the increased costs will be swallowed up by them. Some, of course, may be able to swallow the additional costs, such as Amazon who announced £1,000 signing on bonuses for temps in some positions.

The real picture here is that the consumer is likely to see a surcharge for delivery. There has also been speculation that, regardless of visas and despite the increase of bonus payments being made, workers are not being enticed to work in warehouses due to the conditions they present. Can the warehouse hire in time the required labour to fulfil the demand, especially with the run up to Christmas? Christmas is a time to rejoice, or at least take time to be with family, and we are assured that this year will be a “good one”.

Businesses everywhere that have a high season around December are hoping that there is some fairy dust that is being sprinkled to ensure that there is a delay to the burden of increased costs to consumers, drivers are made available for deliveries, and shelves remain full.

As for 2022? I would say let’s just breathe and enjoy what we can in this moment and hope the storm passes us with no major devastation. (My Christmas wish).

Rashmi Dube is a partner at gunnercooke

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