Auditel Consultant:
James Bury

Inflation – making it work in your favour

04 Feb 2010 | Filed under: Cost reduction

Here’s something we haven’t seen for a while – increasing inflation. It’s hard to tell just how much it will grow, but as and when the economy picks up there will be strong forces driving inflation upwards. Companies who have shaved margins to the bone will need to increase prices, the government will need to raise more tax to tackle the ludicrous levels of debt we’ve acquired, and organisations will be looking to raise profits so they can reduce borrowings. The weak pound will increase the cost of imported goods. Consumers who have been on an enforced credit ‘diet’ are going to be tempted to binge on a lot more than just cake and biscuits, increasing demand for goods. All this translates into higher prices and inflation.

So, how does this help businesses? Well at the moment we can sometimes negotiate very good 3-year + rates for electricity. You pay a slight premium for these, but this is often less than inflation, so you effectively will get a discount each year – the higher inflation goes, the more of a discount you get. Add to this the likelihood of increasing energy costs as governments try to reduce carbon emissions, and energy production becomes constrained by limited capacity and burdened by the need to re-invest, the idea of fixing costs at good rates is increasingly attractive. Long contracts aren’t always the best option for an organisation, and some rates are better than others, but the detailed costings and projections we produce give you the information you need to make the right choices. Even if you are tied into long contracts, we may still be able to help, so feel free to get in touch for some informal advice.