Inflation and Wage Hikes Pose Financial Strain for Small Business Owners

Lee Howard, who transitioned from being a painter and decorator to the owner of Forty Six Coffee Shop in Neath, has revealed the growing difficulty in keeping prices reasonable for customers amidst rising operational costs. Alongside his wife, Guiliana, he has been running the coffee shop for a decade, but escalating prices, particularly due to the recent wage increases, have put considerable strain on their business.

Although inflation has slowed since reaching a 40-year high in 2022, it continues to exceed the Bank of England’s target of 2%. On Thursday, the central bank maintained interest rates at 5.25%, a level not seen in 16 years, further increasing the financial pressure on both businesses and individuals.

“In April, we had to raise wages by 10%,” Mr Howard explained. “When you add that on top of everything else, it becomes the toughest challenge to absorb.”

One of the key factors influencing the Bank of England’s decision-making is the recent increase in the National Living Wage, which rose from £10.42 to £11.44 per hour. While this wage hike is beneficial to employees, it presents a significant challenge for businesses in terms of absorbing the increased labour costs, especially when customer prices are already under pressure due to inflation.

A staff member, Oliver Altissimo, a 23-year-old university student studying computer game design, shared how rising costs have affected him. Although he lives with his grandfather to reduce living expenses, the overall financial pressure remains high.

Among the café’s regular customers, concerns about rising prices are widespread. Adriana, who lost her teaching job during the pandemic, expressed frustration over constant price hikes. “Things are going up all the time,” she said. Anne, a retired teacher, echoed her sentiments, pointing out that even modest increases in price make a difference.

Despite the mounting pressures, Mr Howard has been able to retain a loyal customer base. However, he noted that younger patrons, particularly those struggling to get on the housing ladder or manage mortgage repayments, are now visiting less frequently, opting for visits every other week rather than weekly.