How does inflation affect contractors?

The UK’s Retail Prices Index (RPI) increased to 3.1% from 3% in December, meaning the country is currently off target. The target was set at 2.3% in June 2012, but to date the country has failed to achieve this. The Consumer Prices Index (CPI) is also missing the target of 2%, as it has held at 2.7% for some months now.

If you are a freelancer, you might wonder just how these percentages will affect you. Changes in inflation are never good, as it is always preferable to stay on target, but as you can see this hasn’t been achievable in these tough economic times

What is inflation?

Inflation refers to the increase in prices for goods and services within an economy. There are a number of reasons why prices may rise, including the cost-push, demand-pull and bad monetary policy inflation models.


Cost-push inflation

This happens when the cost of supplies increases. This may happen due to shortages, such as in the 1970s when fuel became scarce and therefore became more expensive.

Demand-pull inflation

This kind of inflation occurs when supply cannot meet demand. This means that if there is high demand for a certain product, but not enough products for everyone, the costs will increase as a result.

Bad monetary policy

If a bank produces too much money it then loses its value and this leads to inflation.

These inflation models can raise the CPI and RPI, which can affect contractors throughout the country.

How are contractors affected?

Both CPI and RPI can affect contractors, as it can cost them more to purchase products for their business and they then need to increase their own prices in order to recoup their costs.

Are there any upsides?

Absolutely – contractors often have the upper hand when inflation is concerned. This is because they don’t have to contend with the problems that fulltime employees do. Many people working within larger companies will lose out on pay increases due to inflation, whereas contractors can negotiate their own rates to get the money they need.

A lot of companies are also looking to employ contractors now rather, as it can help them to keep costs down. This of course works out wonderfully for freelancers, as they can now call in as many jobs as possible ensure they are working to maximum capacity.

Talk of inflation usually has negative connotations, but that isn’t always the case for freelancers. While many will certainly see some changes to their work as a result of inflation and recession, many others may find that their business flourishes as a result.

This article was provided by Aurora Johnson on behalf of Nixon Williams, a contract accountant with many different services for freelancers including a take home pay calculator that is free to use.

Green Revolution

Green Revolution
At the end of the last century, the world intensively started to pay attention to the environment, and at the same time the need for a healthier diet developed. There was a fundamental change in public consciousness that nature is not something that is God-given, but the only home that must be fostered and preserved. World governments reacted by introducing legal regulations which in turn stimulated the development of businesses related to this industry. “Environmental marketing”, “Organic marketing” or “Green marketing” are some of the terms used in marketing of products that are beneficial to the environment.

The difficulties about definition
Nineties of the last century were called “environmental decade” because the environmental and social care significantly affected the purchasing decisions of consumers. The concern for the environment in which we live and the needs of customers for green products have led to the development of green marketing. Definition of this type of marketing creates a challenge in itself, because its definition in commercial, social and environmental terms have somewhat contradictory meanings. Marketing of products that are presumed to be safe for man’s environment is a commercial definition, developing and marketing of products that have minimal negative impacts to the environment or to improving of its quality is a sociological definition, and ecological definition applies to organizations that promote, produce and pack products that are appropriate and acceptable for the environment.

Identification of consumer
Green marketing covers a wide range of activities that includes the modification of products, processes, packaging and advertising. First, it is important to locate and identify the consumer, then assess how this group of consumers is informed, and what additional training is needed to expand and strengthen it. If we observe the demographics of buyers of environmentally friendly products, women are more interested in the environment than men, often buy organic products and women are more engaged in sorting waste for recycling.
However, both sexes are equally represented in the activities of preserving the environment in which we live. Also, people with higher incomes and higher levels of education, and therefore greater access to information, often pay more attention to organic products and the environment. Psychological indicators of consumers tell us that people with conservative values do not want to complicate their life with the changes or do not want to be part of something that does not comply with basic standards. Therefore, they are not open to changes in standards and purchase green products. On the other hand, people who buy organic products attach more importance to internal values such as happiness and personal fulfillment, while people who are not fond of buying such products respect more external values such as sense of belonging, security and respect. Observing the behavior of customers who use green products to a large extent has shown that the opinion of other people, states and environmental groups have huge impact of them. They also have a strong identity and high degree of concern for the environment.