The costs of doing business in the UK

Doing business in the UK now comes with increased costs – so if you find yourself concerned for the economic future of your business, you’re not alone.

You will already be aware of the impact of the National Minimum Wage (NMW) increase and the rise in employer National Insurance Contributions (NICs) – but there are other increased costs to doing business in the UK that you may not have considered.

It is vital to understand these potential impacts in order to help your business stay competitive in an uncertain economic climate.

Impact of inflation

As of March 2025, the UK’s Consumer Price Index (CPI) inflation rate was listed at 2.6 per cent.

While this is an improvement on the 2.8 per cent observed in February, it is still significantly higher than the Bank of England’s desired two per cent inflation rate.

This will result in the cost of items and services remaining high across the board.

Additionally, although the Bank of England’s decision to cut interest rates to 4.25 per cent is partly due to inflation being lower than expected in March, inflation is expected to rise temporarily, largely due to higher energy prices.

Tariffs and trade wars

If your business is reliant on imports and exports, it is worth considering how the introduction of US tariffs might negatively impact the flow of your commerce.

As the nature of tariffs is continually in flux, it would benefit those who may be impacted to keep a close eye on how things unfold both in the short term and the long term.

If you feel you may be affected by tariffs, a consideration of different suppliers may help alleviate some of the costs.

Importantly, leaving extra room in your budget for higher import and export costs will allow you to continue to operate with efficiency.

Late payments

The late payment of invoices is an increasing problem for UK businesses because it can cause issues with cash flow – and the impact on small and medium-sized enterprises (SMEs) is particularly damaging.

Cash flow issues continue to be one of the biggest causes for business failure within the UK. According to the Government’s accredited official statistics, one in 186 companies on the Companies House effective register entered insolvency between 1 November 2023 and 31 October 2024.

To make sure your get paid on time, always put invoice conditions in your initial contracts with clients, including any penalties for late payment.

Additionally, utilise cloud accounting software to automate sending regular reminders to your clients, as well as notifications of overdue invoices.

How can I overcome these challenges?

Although it can be tempting to bury your head in the sand, staying on top of your finances is key to surviving in an uncertain economic climate.

While many risk factors are hard to account for, continual, effective budgeting can help your business stay competitive regardless of what comes your way.

Review your income, expenses, and savings goals regularly to evaluate your financial position and course correct where necessary.

Regular management accounts can be invaluable for forecasting cash flow and ensuring your business has the funds necessary to mitigate future high costs.

Better business with Butterworth Barlow

While you cannot always predict what lies ahead, that does not mean that you cannot prepare for it.

At Butterworth Barlow, we provide business advisory services designed to guide you through key decisions, help you overcome obstacles, and position your business for long-term success.

We’ll work closely with you to assess your business plans and identify future risks and challenges.

By reviewing your financial position, we can help you draw up effective strategies to keep costs down and profits up – giving you the confidence you need to tackle future challenges head-on.

For tailored advice on managing your business finances, contact us today.