How restaurants can deal with rising inflation

So, what's causing this?

From all the shortages we've witnessed this year (I'm sure you'll remember the toilet paper crisis) it meant that there was a significant surge in demand for products and services, pushing their prices up.

One of the main reasons is the rise in energy costs, this rise is being passed on from the big firms down to the consumers, meaning higher bills for us. We use electricity 24/7 in the modern world, so there's no way of hiding from this hike.

Higher costs also mean lower margins for businesses, who then have to up their prices to keep themselves profitable. This is why rail fares, gas prices, TV and broadband prices have gone up.

What can be done to tackle inflation?

You'll have seen the interest rates going up, now at a high of 0.5%, which is usually the Bank of England's traditional response to inflation. People with mortgages or borrowed money will instantly see their monthly payments go up from their next bill, tied with the Bank of England's rates.

So you're wondering why making borrowing expensive helps inflation?

Generally, the idea behind this is that when borrowing is more expensive, people have less to spend. In turn, they will then buy fewer things and demand will shrink - meaning stabilised prices.

This works if inflation is caused by a rich economy, but if it's caused by external forces such as a global hike in energy prices, then this may not exactly be the perfect solution. Maybe increases in taxes could be the alternative route.

Have you adapted to rising prices?

Has inflation meant you're now spending less on shopping or living your life? We're all in the same boat, now is the time to be savvy with all your payments! Having a diverse investment portfolio can help you combat inflation, money in the bank is losing it's value year on year - your money is worth a staggering 5% less this year due to inflation. Investing in assets such as property, stocks, shares or even crypto are generally assets with future growth (as long as you pick the right ones!)

A great way is to increase your prices by the average inflation rate each year can help keep you on track without upsetting any customers, a 2-5% increase per year could keep you on top of inflation. There's also room for bargaining and switching suppliers where possible to find a more reasonable cost alternative - you never know until you've asked.

Conclusion

Try to track your outgoings, where you can save a few £'s here and there, you'd be surprised at how much this could amount to. Unsure how to do this?

If you're interested in finding out how, book a call with one of our accounting experts or call us on 0113 240 4100.