Just as consumers are feeling the pinch, businesses are dealing with increasing overhead costs. The implication for owners, entrepreneurs, and business managers is wider ranging. Still, there are solutions which can beat, reduce or even use inflation to advantage.

The inflation challenge

According to recent work by the CBI (Confederation of British Industry), average costs in UK manufacturing grew by 87% in the three months to April 2022, the fastest rate since July 1975. Some of the rises are related to the post-pandemic bounce back. Yet the need to keep the lid on expenditure can hardly be questioned.

With higher inflation, it’s harder to plan, prepare budgets, price products appropriately, and control in-put costs. Investment is more risky and employment costs more complicated.

Follow the money

Since all businesses are different, the best general guidance on costs is to follow the money. What are the biggest costs of running your business? It’s probably best to go after the big numbers first: a small change to a big number may be more significant than a big change to a small number.

A written checklist, such as the one below, might make a good starting point.

• Property

• Wages

• Input costs

• Heating and lighting

• Financing

• Admin and marketing

That said, no cost is too small to save and concerted efforts to make many little changes may be as effective as trying to find savings in the larger input cost factors. 

Unify and magnify

An integrated costs strategy might be the best way forward, a strategy which actively brings financial and sustainability imperatives together to magnify impact.

For example, you might look for office or production space that is smaller. Rent and fuel costs are both likely to be cheaper.

Because you’ll need less space, similar benefits will come with a balanced approach to employees’ in-office time with working from home. That may feed job satisfaction and productivity which, in turn, helps ‘pay for’ inflation-linked wage agreements.

Spend and save

It may be appropriate to invest in the short term to reap long-run benefits. Replacing office appliances with super-efficient models, for instance. You might think about solar panels, LED lights and insulation. You may expect upfront costs to be recouped in low bills and price predictability. Yet the environmental benefit is justification of its own.

Buying raw material, production capacity, and supplies in bulk may also pay off. But be sure to remember the potential pitfalls. The raw material may degrade or become obsolete. There are storage, working capital and financing implications as well.

‘Green’ incentives

An additional option might be to introduce ‘green’ incentives for staff to implement savings. For example, your company could donate a portion of any cost savings to a sustainability programme such as tree and hedgerow planting.

The immediacy of posting weekly or monthly cost savings scores might work well. It will also underline the usefulness of visible metering. Measurement and management are often inextricably linked.

Such incentives may give heft to small savings that, in total, have a larger impact. Good habits, hopefully, will become second nature and make employees feel better as well as saving the business money.

Value for money

Cost and waste reductions are almost always possible. Still, there may be hard choices to make about which savings are really worthwhile. If you cut too many corners you may encounter issues around the continuing health of top line sales figures. Ultimately, it’s about achieving full value for money – for your business internally and for your customers.

Managing business costs and uncertainty

Businesses are facing unprecedented challenges right now and meeting financial obligations can be hard. Support is available should you need it.

Find out what support is available

You may also be interested in:

Sustainability hub

Supporting UK businesses transition to low-carbon, sustainable business models and operations to pursue new clean growth opportunities.

Business Guides

Wherever you are on your journey, our hub provides practical guidance to businesses of all shapes and sizes.

Managing inflation and costs

Support for businesses managing the impact of rising costs and economic factors on trading.

Important legal information

Lloyds Bank is a trading name of Lloyds Bank plc, Bank of Scotland plc, Lloyds Bank Corporate Markets plc and Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH.

Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no. SC327000. Lloyds Bank Corporate Markets plc. Registered office 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 10399850. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278, 169628 and 763256 respectively.

Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH is a wholly-owned subsidiary of Lloyds Bank Corporate Markets plc. Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH has its registered office at Thurn-und-Taxis Platz 6, 60313 Frankfurt, Germany. The company is registered with the Amtsgericht Frankfurt am Main, HRB 111650. Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH is supervised by the Bundesanstalt für Finanzdienstleistungsaufsicht.

Eligible deposits with us are protected by the Financial Services Compensation Scheme (FSCS). We are covered by the Financial Ombudsman Service (FOS). Please note that due to FSCS and FOS eligibility criteria not all business customers will be covered.

While all reasonable care has been taken to ensure that the information provided is correct, no liability is accepted by Lloyds Bank for any loss or damage caused to any person relying on any statement or omission. This is for information only and should not be relied upon as offering advice for any set of circumstances. Specific advice should always be sought in each instance.