Published Monday 13th July 2020

I don’t know about you, but I’m feeling a lot smarter working from home at the moment. Why? Well my local barber re-opened last week and my rather unruly mop (that strangely drew comparisons with Keir Starmer) is no more.

However, it seems I’m not alone in being hit in the wallet; my barber’s prices are up by 80% compared with pre-lockdown pricing. Dominic Frisby from MoneyWeek raised the issue on Twitter and it seems many hairdressers and barbers across the country have done something similar. Prices have gone up – and quite substantially.

You’re probably asking yourself, why should I care about the cost of your haircut? Well, when future historians come to write the story of the great inflation of 2020 / 21, perhaps they’ll say it started at the hairdresser’s.

There are several lessons from my barber’s decision that you’ll find being applied across the board by your suppliers in the coming months.

Most businesses have effectively been closed for three months, so suppliers want to recoup some of the money they’ve lost in fixed costs. Perhaps the extra cost they’ll apply are justified by the fact that, with new safety requirements, contractors cannot attend your office during normal working hours.

There will be other services, such as cleaning and washroom where demand is greater; contractor’s feel entitled to put their prices up. That’s the way markets work.

Other suppliers will exploit the situation with spurious charges for PPE, sanitising and special delivery conditions for instance. As I wrote in my previous letters – some suppliers are aggressively marketing costly “Trojan Horse” deals to firms under cash flow pressure.

Maybe, as office life starts to normalise – if office life starts to normalise – my barber, and your suppliers will reduce their costs. But will they ever return to the pre-lockdown levels? I doubt it.

Clearly, with you being on the other side of the exchange, it’s important to consider how you respond.

We have several novel ideas being put into action with our clients that will ease cash flow worries and ensure contractual agility, we’re also offering advice on outsourcing non-core activity that can be turned on and off – unlike salary costs.

Inflation is coming, but with effective planning your firm does not need to fall victim.

Until next time.

About the Author: Jason Adderley, joined ERA after a 15-year career in the commercial property development and investment industry, and works with a diverse client base comprising solicitors, actuaries, chambers, patent attorneys, accountants, surveyors, consulting engineers and recruitment consultants.

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