We have seen the prices of some goods and services double in the last few years with businesses looking for ways to remain profitable, from reduced portion sized goods with a moderate price increase to excessive price increases on various products and services. However, these activities have not yielded the expected outcomes that companies sought to achieve – businesses are still going bust and the economic outlook is not showing signs of an improvement.
For the last few years there has been a mismatch in the increase between wages and expenses, therefore disposal income remains low or non-existent. This has had an impact on investment affecting growth, the UK stock market and reduced spending power to support businesses in general. These conditions will be exacerbated further as companies look to reduce their costs through headcount reduction. If people do not have the income to support businesses, they will continue to make losses and eventually go bust.
It is now a chicken and egg situation between reducing wage expense to cut costs or increase wages to boost disposal income and support businesses. Perhaps, businesses can begin to reduce their margins during price setting to keep customers and remain sustainable. It is time for a price reset.
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