The recent Ukraine war has been the touchpaper for a multi-national cost of living crisis that had in fact been some time in the making. COVID-19, commodity prices and the environmental imperative, to name but three factors, have coincided to push prices of goods and services across the board to all-time highs. The result has been a surge in inflation, with the UK alone now hitting 9% in April.

Just as it was with the pandemic, the question on everyone’s lips is ‘when will this be over?’. Key institutions are scrambling to respond, and governments are introducing short-term, palliative measures in the hope of staving off recession. But the true answer may be that increased prices are here for good. It may be that the world needs to adjust to new realities in the way we buy and live. But what are the key costs causing this crisis for consumers, and how are they likely to change over time?

Energy

The first major culprit in the cost of living crisis is energy. This increase was underway well before the recent war, as wholesale prices had steadily risen in response to increased global demand, and the push towards greener but more expensive energy production.

These factors are here to stay, and while we may see a stabilising over the next two-three years, a return to previous levels is highly unlikely – and that means a new and more challenging ‘normal’ for consumers. This gloomy prognosis is even more likely for Europeans, now deprived of Russian energy sources that will continue to be shut off or severely curtailed for the foreseeable future.

Food

Next comes food. Myriad factors are driving up shopping basket prices, but at the highest level, changing weather patterns around the world are responsible for significant disruption in the way the world farms and produces. Critical foodstuffs have been massively affected by atypical weather events over the past few years. Supply chain disruption caused by COVID-19 is another major contributor, with factories and logistics facilities having to limit and re-configure labour usage to limit the spread of infection. Finally, the drive towards sustainability has seen great increases in production costs, as the world increasingly demands that food is produced in a greener way and under improved labour and animal welfare conditions.

All of these are long-term factors - adjusting to changing weather patterns, for example, could take the world decades to solve, and environmental concerns are unquestionably here to stay. Again, prices may stabilise in the medium term, but a return to previous levels is almost out of the question.

Interest rates

Many central banks, including in the UK and the US, are raising interest rates in an attempt to combat inflation. But while those with savings may benefit, the result is also a significant increase in the cost of consumer borrowing. Mortgage rates are going up, as is the cost of credit at just the time when consumers are having to rely on it more than ever.

These actions could potentially be reversed in the medium term. If inflation can be stabilised, governments might in 2-3 years be in a position to reduce rates once more – but that ray of hope is dependent on a host of other factors in the wider economy.

The value of financial understanding

It seems almost certain that a higher cost of living is here to stay. But that doesn’t mean there’s nothing we can do about it.

W1TTY is a young finance brand with a growing customer base amongst students and young people. As quickly as we’re taking off, we’re also acutely aware of what our customers are facing in managing their finances as the cost of living crisis continues.

In-depth educational services are needed right now to help young people deal with these issues. With so many facing a tougher challenge in balancing their budgets, it’s never been more important that they’re equipped with the understanding, know-how and responsible signposting that will help them to make prudent decisions about their money.

Young people deserve to have bright financial futures. Through a combination of loyalty and reward schemes, gamified learning and personalised features, W1TTY is about empowering our customers with accessible, engaging education and saving incentives. By doing so, it’s our aim that we can help insulate them from some of the worst impacts of the current crisis.

About the author: Ammar Kutait is the CEO and Founder of W1TTY.

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London-based online food delivery company Deliveroo has been valued at over $7 billion (£5.1 billion) after its most recent fundraising round.

Deliveroo announced on Sunday that it had secured another $180 million from its existing investors, including minority shareholder Amazon, as it gears up for a blockbuster initial public offering in the coming months. The IPO will be London’s biggest new share issue in three years.

The company, which had already raised $1.5 billion from its investors, plans to use the newly raised funds to innovate, expand its online grocery business and establish delivery-only kitchen sites.

"This investment will help us to continue to innovate, developing new tech tools to support restaurants, to provide riders with more work and to extend choice for customers," said Deliveroo founder and CEO Will Shu in a statement.

Deliveroo is among a range of eCommerce companies to benefit from the shift in consumer spending caused by the onset of the COVID-19 pandemic in 2020. Last April, the Competition and Markets Authority approved Amazon’s purchase of a 16% stake in Deliveroo after the firm warned that restaurant closures in the first UK-wide lockdown could cause its collapse.

With the ensuing country-wide rise in demand for online food delivery, Deliveroo managed to double its revenues in the UK and Ireland, achieving profitability in the second and third quarters of 2020. It is now planning to add a further 100 cities and towns in the UK to its coverage, having already built up a base of 140,000 restaurants on its platform.

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A successful IPO would complete the company’s recovery from the initial shock caused by the pandemic. JPMorgan and Goldman Sachs have been hired to advise on its stock market flotation.

Sarah Taylor is a Content Author at High Speed Training, the specialist online training provider to the hospitality sector. She advises cafes, pubs and restaurants on how they can adapt their business for delivery services in response to Government guidelines in order to stay profitable:

Following the Government’s call to close cafes, pubs and restaurants, many establishments have taken the initiative to temporarily change their business models in order to keep a source of revenue and operate solely as a ‘takeaway’ or delivery service. Customers are keen to show their support, as demonstrated by the widespread use of #supportlocal on social media. Meltwater data tells us that on the day businesses closed their doors to dine-in customers, the hashtag was mentioned 21,700 times in 24 hours.

In the first week of business since shutdown measures were introduced, we collaborated with market research company OnePoll to conduct a nationally representative survey of more than 2,000 people in the UK. The nationally representative survey highlighted continued widespread support and demand for local hospitality venues to serve their communities during lockdown – 83% of people would order food and drink to enjoy at home. Businesses therefore have the opportunity to continue generating an income off the back of customers’ new found appetite for supporting local establishments.

While the new legislation allowing takeaway and delivery services, as well as the online public support, represents a much-needed lifeline for hospitality businesses, it brings with it new challenges and a steep learning curve to ensure operations are run effectively, safely and are still profitable. New food hygiene procedures and contactless delivery methods are two of the many considerations that managers across the UK are grappling with.

Businesses therefore have the opportunity to continue generating an income off the back of customers’ new found appetite for supporting local establishments.

To help guide pubs, cafes and restaurants as they create new survival strategies, we asked the nation what would make them more likely to order a takeaway or delivery service from their ‘local’. Paying online and the promise of high food hygiene standards were the two most popular criteria, both voted for by 42% of Brits, providing a useful indicator for the information businesses should be promoting  in order to continue generating revenue during these turbulent times. ‘Contactless’ delivery with no face-to-face contact was third (28%).

Recognising the demands on supermarkets currently, many people also pointed to a preference to avoid stores where possible (25%), or a lack of available delivery slots (22%), which provides a solid rationale for businesses selling groceries direct to the public such as freshly made pasta and sauces to tap into a new pool of potential customers.

From a marketing perspective, a quarter of people (25%) indicated that they would like to be made aware of healthy meal options. Online interaction whether via websites or social media channels was revealed to be the least likely way to prompt an order and increase profitability, for example hosting virtual cooking classes.

Looking internally, implementing new operations at the same time as meeting a surge in demand for delivery can be extremely difficult for businesses to manage. Wherever possible, businesses should try to develop short, medium and long-term contingency plans that factor in processes for keeping standards high, timely order fulfilment, balancing good stock levels of fresh ingredients and increase income as a result.

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One of the biggest challenges will be choosing how to fulfil orders. Look at the benefits and limitations for delivering food direct to customers or signing up to a delivery provider if within a catchment area. The likes of Deliveroo and Uber Eats have recently published guidelines for restaurants as they see sign-ups in urban areas soar. Those outside of their catchment areas or that prefer to go solo may prefer to utilise software from the likes of Access Hospitality. Whichever route is chosen, the method of serving customers needs to be in line with profit margins in place, adhere to the legal requirements for food delivery services and work efficiently for both the business and consumer.

As well as choosing the most convenient delivery model, businesses should also review and condense their menu to streamline their service and adjust opening hours to target peak time periods in order to guarantee profitability. These are disruptive and defining times for the hospitality sector, and businesses need to be reacting quickly to the constantly evolving situation. Fully grasping how and why Brits are changing their eating habits, as well as carefully reviewing how best to modify their offering are just some of the simple steps businesses need to be taking into account in order to keep up with the change in demand.

British farmers are being hit by a shortage of migrant workers and are warning a dysfunctional Brexit will have a devastating impact on their industry. They are calling on the government to provide direction and answers on the future of British farming after the UK leaves the European Union. Bloomberg’s Angus Bennett travelled to Kent, in Southern England, to meet the farmers and migrant workers on the front lines of Brexit.

Video by Angus Bennett and Gloria Kurnik

In a keynote speech to the American Chambers of Commerce, in Brussels last week, Fiona Dawson (Global President of Mars Food) warned that failure to reach a new UK-EU free trade agreement for food would threaten jobs and lead to higher consumer prices.

Noting that protectionist trends are threatening to undermine global trade and make the world less connected, she noted that the future relationship between Britain and the European Union is a critical test as to what future will unfold. Specifically she:

• highlighted how a return to trade barriers would undermine integrated supply chains, which are vital in the large food sector;
• warned that the higher business costs arising from such trade barriers would ultimately flow through to consumers in higher prices and could threaten jobs;
• cautioned that regulatory divergence could undermine future UK-EU trade, and should be avoided;

Jobs and Consumers Must Come First

• urged all parties to the Brexit negotiations to focus on the mutual benefits that close UK-EU economic ties provide; and
• emphasised that politicians must put workers and consumers at the forefront of Brexit negotiations.

Key extracts published pre-speech:

"Brexit clearly poses some problems, but the fact is Britain has decided to leave the EU and the task now is to look forward and ensure that the decisions taken from this point forward achieve the most positive outcome for all concerned."

"The absence of hard borders with all their attendant tariff, customs and non-tariff barriers allows for this integrated supply chain, which helps to keep costs down. The return of those barriers would create higher costs which would threaten that supply chain and the jobs that come with it."

"If Britain ends up trading with the EU on the basis of WTO rules, 'Most Favoured Nation' rates would come into force. In the area of confectionery that alone would mean tariffs of around 30%. For animal products, it would be 20%; for cereals over 15%; and for fish and fruit over 10%. Significant new tariffs would also apply outside the food sector, notably in the area of clothing and textiles. Unfortunately there is no way that those costs could be absorbed without flowing through to consumers in the form of higher prices."

"It is a fact that Europe after Brexit will remain a critical market for UK exports and likewise the UK will remain an important market for goods produced and manufactured in other European states. There can be no economic advantage either side restricting trade with a large market situated on its doorstep. In simple terms, if the UK and the EU fail to agree on a new preferential deal, it will be to the detriment of all."

"Reaching an agreement will require compromise and an appreciation of the economic interdependency between the UK and EU. It requires an acceptance of the benefits that common regulatory standards and the movement of labour can bring, and an understanding that the imposition of significant trade barriers would ultimately hurt everyone and undermine, rather than strengthen, European unity."

"Other member states should remember this is not about 'punishing' Britain for her decision to withdraw but rather about finding the best solution for European and UK workers and consumers. That consideration must come first as we build the future."

(Source: Mars, Incorporated)