What is the real rate of inflation for your business?
The official CPI inflation rate is around 10% in the UK. This is a broad measure; for startups, other indicators or data may help them understand the real impact of rising prices on their operations.
14 October 2022 • 5 minute read

How are rising prices likely to impact your business? Every firm is likely to have a different answer. While the headline CPI (consumer price inflation) figure published monthly by the Office for National Statistics is a useful guide to what's happening in the wider economy, startups and other small companies need more precise data.
The impact of higher energy prices
While many startups – especially those in technology-related sectors – take a lean approach to setting up and running their business, rising fuel and power costs are hard to avoid.
"Most technology-enabled startups are heavily dependent on cloud services," explains Christy Kulasingam, founder of Radbourne Consulting. "Prices for these are likely to rise as they will directly feel the impact of energy costs. Also, watch out for shrinkflation: some services may scale down features and introduce new tiers of service."
Seb Robert, CEO and founder of Gophr, adds: "It would be wrong to assume that technology startups are not facing rising energy prices – it depends on where you apply your tech. We are a tech-enabled courier platform, meaning that fuel and energy costs are a big concern for the couriers that work with us and, therefore, for us.
"We've already implemented a 10% price hike for customers to help resolve this. Seeing as inflation doesn't seem to be letting up any time soon, the temptation could be to do the same again – but we're also aware that going back to the well for more contributes to the problem."
Customers, the cost of living and weaker demand
Businesses must know how rising prices affect their customers' expenditure patterns. "Customer budgets are changing," says Christy. "Just as you will review your outbound spending, so will they. Your offerings will need to change to continue to match their needs. Being creative will help keep existing customers — and attract new ones."
He adds: "Depending on your business model, you might consider creating or pushing a 'value range', as supermarkets tend to do during recessionary times. On the flipside, you might want to reconsider your customer segments. Perhaps this is the time to assess if you want to go after a more upscale customer base. Several luxury brands, including Bottega Veneta, Chanel, Louis Vuitton, Rolex, and Versace, have been quietly raising prices as we enter the recession."
Rising salary expectations
As prices across the economy rise, workers are inevitably asking for higher wages. Casey Woodward, founder and CEO of agritech startup AgriSound, says: "The rising costs we are feeling most are staff costs and overheads. There is more pressure on smaller businesses to raise wages to keep up with the cost of living. Rising costs mean we must be very prudent with recruitment – but undoubtedly, this may add workload pressures to existing staff members in the meantime."
Casey adds that the low level of unemployment in the UK economy means there is "something of an arms race" when trying to recruit the best talent.
Seb Robert adds: "We're already seeing new graduates turn down tech firms to go back into finance. I think the edge for any business is to agree to remote-first working arrangements: living in major cities still seems more expensive than ever. If you as a business can mitigate those pressures on your people, that's got to be a good thing."
The cost of setting up
It has also become more expensive to start a company, Casey Woodward says. "Staff costs are rising faster than business growth, in some cases, due to the extreme cost-of-living increases. There is a need to raise more capital to maintain growth levels, which is challenging under the current economic climate."
He adds: "Tech firms will be affected by the fact that it is becoming more difficult to raise investment as angels and VCs are becoming increasingly risk-averse and needing to allocate funds to existing portfolio companies."
Seb Robert says: "While it's without a doubt more expensive to set up now, there is a school of thought that says times like these are the best to start one, as operating circumstances are so tough it gives you a good grounding. I can't speak to it personally, but I know that if your business faces electricity or gas bills that are substantially higher than they were three months ago, you'll be focusing hard on workarounds."
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