Why Inflation Matters Right Now: Costs are up everywhere!
Have you noticed that costs are higher on fuel, food, bills?
It’s not your imagination. UK inflation hit 3.6% in June 2025, the highest since January 2024.
2022 = 7.92%
2023 = 6.79%
We could be on for another year of high inflation, way above the government targets around 2-3%.
That means your money doesn’t stretch as far. For you as a business owners, higher costs squeeze your margins, distort cash flow, and make planning tougher.
But there is always an upside. Every problem presents an opportunity in disguise. In this case, it’s knowing how inflation works and responding smartly, which can give you an edge.
How Inflation Impacts Your Business
1. Understand the Trends
- Inflation has climbed from under 1% in 2021 to peaks of 11.1% in Oct 2022, now cooling around 3-4%.
- The Office For National Statistics (ONS) projects the Consumer Price Index (CPI), which is a measure of inflation, could peak near 3.7% in the autumn before easing afterwards.
- Utilities, food, fuel, and rent are the main drivers.
2. What are the Wider Economic Effects? What could happen?
- Inflation above 2% may slow Bank of England’s planned rate cuts.
- Mortgage and loan rates could remain higher for longer, which is bad news for borrowing and investment decisions.
- Consumer spending, including your customers, may soften as households and businesses tighten budgets.
3. What Are the Risks to Your Business?
- Input Costs: Suppliers may charge you more for materials, services, or energy.
- Pricing Delays: Lagging pricing can squeeze your profits.
- Cash Flow Crunch: Higher costs + slower sales = more stress for you.
- Contract Leverage: Fixed-price contracts become riskier, because you’re exposed to more market and price volatility.
What You Can Do
Here are practical steps to protect your business:
- Build a Cash Buffer
- Aim for 3-6 months’ operating costs. It cushions you from rising expenses or slow-paying customers.
- Review Contracts & Prices
- Check your legal agreements and consider modest price adjustments or cost-sharing terms. Treat key partnerships in particular, with close care and consideration.
- Match Costs with Incomes
- If costs rise, adjust your pricing or payment terms (e.g. upfront billing, shorter invoicing cycles).
- Track Key Metrics Monthly
- Monitor the effects of inflation: “if it isn’t monitored, it isn’t managed”. If you monitor your core business costs, your margins, your cash flow etc. monthly, you’ll be able to time your responses more accurately, and action them quicker.
- Plan For Multiple Scenarios
- Create three financial plans: Optimistic (Stretch), Base (Likely), and Pessimistic (Worst Case) so you’re prepared for future surprises, and you can adapt and flex when needed.
- Get Strategic Advice
- We help clients model different inflation scenarios and adapt growth plans accordingly. We can also help you!
Inflation can often feel unsettling, uncertain, and it’s easy to get lost in all the noise and ‘expert’ predictions. However, you can steer through it with awareness, proper planning, scenario analysis, and by making proactive decisions.
The worst thing you can do? Nothing.
Just waiting for inflation to squeeze you slowly out of business, before you take action. If you take smart steps now you can protect your margins, your cash, and your peace of mind.
The usual adage applies: time and resources spent now, can save you much more time and resources later.
Let’s Build You a More Resilient Financial Home
If you’re feeling the pressure of rising costs and want to build stronger resilience into your business, we’re here for you.
If you know what to do, but are struggling to find the time, let us help you build it, model it out, and project it forward so you can take the necessary business decisions today.
Or if you’re not sure where to start, send us an email or give us a call, and we can help you lay out the available options.
RedBrick: A better home for your business finances. Email: hello@redbrickaccounting.com
