Cost of living crisis hits consumer and businesses
We live and work in an integrated global economy. We enjoy the good times together and we all take a hit when the storm clouds gather.
COVID-19, Brexit and conflict in Ukraine combined to create a perfect storm for both businesses and consumers. UK inflation stands at 9.4%, a 40-year high, and a cost of living crisis is upon us.
This is often framed in the context of individuals. People struggling to heat their homes, pay rent and mortgages, buy food, fill their car with petrol and afford childcare.
And this is also a crisis for business. This was summed up in June by Martin McTague, chair of the Federation of Small Businesses (FSB), who said: “The cost of living crisis starts with a cost of doing business crisis”.
SMEs drive our economy
Around 99% of businesses in the UK are SMEs (small and medium-sized enterprises) and there are 5.6m of them. They employ more than 16m people, 61% of the workforce. Their contribution to the national economy exceeds £200bn.
According to the FSB, more than 400,000 SMEs disappeared during COVID lockdowns. Those that survived were just starting to put their heads above the parapet. Now they face fresh challenges.
So-called producer price inflation, which includes input prices for firms, is up 22.1% over 12 months. Energy prices are soaring as are prices of raw materials. Supply chain constraints, made worse by Brexit, mean goods and raw materials are harder to get.
A fifth of firms say input costs are their main concern, reports the FSB. It adds that many employers are struggling with labour and skills shortages. This was backed up by the Bank of England in July. It revealed two-thirds of companies were finding it “much harder” to recruit the right people. This further sends costs rising.
Passing on the costs
Higher costs, as well as hitting profits and investment, are eventually passed on to consumers. This pushes up inflation. Families face higher prices for essential and non-essential goods. Petrol prices and energy costs are soaring.
And while people working from home may be able to reduce the cost of travelling to and from work, spending longer periods at home will push up their energy bills.
The Bank of England will raise interest rates to combat rising inflation. This sparks a higher cost of borrowing for mortgage payers. It also means higher rents for those unable to get onto the housing ladder.
However, people are finding they do have increasing leverage in the job market. And there is growing evidence they are prepared to use it.
Workplace sees a seismic shift
With labour demand outstripping supply, companies are offering higher salaries and more flexibility. COVID prompted a massive shift in the way we work. Post-COVID people are returning to their workplaces. However, millions still work from home either full or part-time.
One recruitment consultant said earlier this year: “Prospective employees are looking more carefully at the culture of an organisation. More and more are looking for flexible/hybrid working… In the medium to long-term businesses need to change.”
This is characterised as the so-called ‘Great Resignation’. It is a phenomenon that saw millions of workers quit their jobs during the pandemic. They left in search of a better quality of life. This exodus hit sectors such as hospitality particularly hard.
Even before the pandemic, businesses were dealing with growing mental health issues. Stress-related absence costs UK employers £26bn every year, according to one estimate in 2019.
COVID-19 worsened the problem. Data from Public Health England reveals the proportion of adults aged 18 and above reporting a clinically significant level of psychological distress stood at 20.8% in 2019. By April 2020 this had rocketed to 29.5%. Fewer people are now prepared to suffer stressful environments.
Some employers respond by throwing money at the problem. They offer higher salaries and other financial incentives. However, smarter organisations recognise this paradigm shift demands a more sophisticated response.
People want financial rewards but they also want to be valued in their work spaces. And they don’t want their jobs to take over their lives. They want more time with family and friends. Note the number of businesses now experimenting with four-day weeks.
Value of incentives
Love2shop reward products are available digitally or as a physical card and appeal to a wide audience. Recipients of the reward products can use them in multiple big-name UK retailers, including Sainsbury’s, Iceland, Heron Foods, ASDA, Primark, Boots, River Island and Argos. Consequently, recipients can use their reward gift for essential items or little luxuries.
Building and timber supplier, Buildbase, is successfully rolling out a customer loyalty programme with the support of Love2shop. The programme incentivises those in the building and construction sector to spend more with Buildbase and in turn rewards its customers with Love2shop products.
In hospitality, Love2shop provides an award-winning customer engagement platform. Food and drink supplier, Brakes, generated more than 60% of its revenues from their ‘Help for Hospitality’ programme during the period of the promotion.
Additionally, in the finance industry, leading insurer, SunLife, uses Love2shop rewards to attract new customers and retain current ones. And in the healthcare sector, Love2shop reward products were used to recognise and reward care home staff during COVID-19. The full case study can be read here.
Employers are increasingly taking the wellbeing of their people seriously, including financial wellbeing. Discount card schemes are just one way to help employees by alleviating some financial stress, which in turn, assists in overall wellbeing. Love2shop provides its employees with an ‘Everyday Benefits’ discount card, which helps cardholders to save money on day-to-day household expenses. It is also a product that’s proved popular with business too and many clients of Love2shop have implemented the Everyday Benefits card for their own employees.
We are in the midst of economic turmoil and tough times are ahead. However, when the economic and cultural tectonic plates shift we discover new ways of living and working. Change is unsettling and also liberating.
‘Our people are our greatest asset’ has been a mantra in the corporate world for two decades. Too often it’s an empty platitude. As we move into a new era, the companies that thrive will be those which make those words a reality.
If you would like to discuss how Love2shop’s reward and recognition can work for your business, please get in contact.