Information & communication sector shows resilience to inflation

New research reveals varying levels of impact across industries due to the escalating cost of business influenced by rising inflation. Notably, the information and communication sector has demonstrated the most resilience, with less effect observed compared to other industries.

By examining fortnightly business surveys conducted by the Office for National Statistics, the team at money.co.uk business bank accounts brought to light the industries that have been less affected by escalating prices. The information and communication sector emerged on top with 44.2% of businesses reporting no impact from price increases during the past year. Following closely behind were professional, scientific and technical activities (43.9%), and education (40.8%).

Digital businesses, including software and cloud services, have been particularly resistant to price increases. The lower variable costs involved once the initial development stage is completed shield these businesses from inflation. Digital products' lack of need for raw materials and near zero-cost distribution contribute to their cost-effectiveness.

However, no sector is immune to inflation. While tech businesses may not require physical materials, they do bear significant operational costs, like server costs, electricity, and most notably, skilled labour. A tech firm's expenditure can spike due to factors such as the cost of retaining staff amidst high demand for skilled workers.

Besides, the tech market's recent volatility, influenced by changes in consumer behaviour post-pandemic, adjustments in investment trends, and broader economic uncertainties, cast doubt over the industry's future stability. Furthermore, the rapid evolution of technology and potential for unforeseen challenges underline this uncertainty.

Kyle Eaton, an expert at money.co.uk's business bank accounts, remarked, "These statistics suggest that industries with high value-added services, intellectual property products, and essential services are better equipped to handle economic shifts that cause prices to rise. They can either absorb the costs due to lower material needs, offset them due to pricing power, or are supported by stable funding structures, making them less vulnerable to such economic pressures."

Help is at hand for businesses grappled with increased costs in the form of mechanisms such as tax relief or deferrals, research and development tax credits for industries like professional, scientific, and technical activities, and sector-specific initiatives. These aids can offer valuable capital for other operational needs, reduce financial strain and provide targeted support measures to address unique challenges, respectively.