Business Costs and Investment Decisions

Rising inflation drives up the cost of production for businesses, including raw materials, labor, and energy. As input costs increase, businesses face reduced profit margins unless they can pass on these higher costs to consumers through price increases. However, higher prices can lead to reduced demand for goods and services, affecting sales volumes and profitability. Inflationary pressures may also deter businesses from making long-term investment decisions, such as expanding operations or investing in new technologies, due to uncertainty about future costs and returns.

This will have a huge impact on your budgets. To maintain financial viability, you may need to adjust service charge budgets to reflect the likelihood of increasing costs during a service charge year. Don’t just assume that you can place the same increase across all services in your budget. While indexes such as RPI and CPI are good indicators, they include many products and services across the economy. You are better served looking into the rate of inflation for specific services within your budget. For example in the last 2 years the inflation rate of utilities has been vastly higher than that of anything else.