News in the Channel - October 2022

RISING COSTS

Toughing it out Rising costs have impacted the channel in many ways – from the price of raw materials to the cost of energy and fuel to increasing inflation – but what effect it is having on businesses and how can they try to mitigate it? By Dan Parton

But, as with 2020, there was a problem lurking just over the horizon that was to catch businesses in the channel and across the economy unawares. When Russia invaded Ukraine, it sent fuel prices sky high. While this immediately impacted on prices at the petrol pumps – and made deliveries less profitable – the ongoing conflict has caused other effects that are now beginning to bite for businesses of all sizes. Firstly, energy prices have risen hugely, and it has also helped to push the rate of inflation past 10% at one point – levels not seen in more than a generation. In addition, the value of the pound has also fallen, due to several factors, including those mentioned above and Brexit, which makes imports more expensive. All of this has served to push the price of raw materials up and, with it, the cost of many products, which are being necessarily passed on through the chain to the end consumer as businesses try to make a profit. Scale of the problem Mark Ash, chief revenue officer at Konica Minolta Business Solutions (UK) Ltd, outlines the scale of the problem of rising costs for the business. “From October, our electricity cost [was set to] increase by an estimated 400% over the previous year’s usage, which will have a massive impact on our business, and the sector as a whole,” he says. “This also comes at a time when office utilisation is at an all-time low.” Many other businesses have faced similar hikes in energy prices, especially those coming off fixed price deals. While the government has announced help for businesses with their energy bills, with the launch of the Energy Bill Relief Scheme in September, which will provide a degree of relief, it is only for six months, at the time of writing. The scheme caps a p/kWh discount on wholesale gas and electricity prices for all non-domestic customers, with the support equivalent to the Energy Price Guarantee for households. The consequences of sustained rising prices for business, the sector and customers are various,

At the beginning of this year, there was something noticeable in the channel that hadn’t been seen since early 2020 – optimism. Dealers, resellers and manufacturers were beginning to look forward again, with the COVID pandemic – and the lockdowns – seemingly consigned to the past and a return to something akin to normal trading conditions and, with it, healthy growth in revenues on the cards.

CONTINUED