"Gosh, How Much!" Inflation, the Silent Killer, in business.

How Inflation Affects UK B2B Services, Wholesale, and Manufacturing Businesses.

For UK-based B2B businesses, inflation presents a unique challenge. Traditionally many businesses within the B2B sector have long-term contracts, fixed service pricing, and with the added pressure to stay competitive, stall or even prevents them from simply passing on higher costs to their customers.

Plus, in the current economic climate, B2B service providers are facing increasing overheads, along with wage inflation, and the increasing reliance to embrace and invest in digital infrastructure to become more efficient.

UK Businesses margins are currently being squeezed from all sides.

For example;

• Wholesale businesses are being hit by rising product purchase costs, transportation increases, and storage costs.
• Manufacturers face challenges across raw material prices, energy bills, and supply chain volatility.

These combinations makes inflation a silent threat, with "Inflation" frequently referred in business circles as "The Silent Killer". i.e. slowly eroding your margins, unless you take action.

UK Inflation isn't coming down in the short term either - The Bank of England shared in May that based on their research, UK annualised Inflation rose to 3.5% (adjusted to 3.4% in June) during May and expected to rise further in Q3 of 2025 and not fall below 3% till we are into 2026.

So, what can you do to mitigate these higher business costs challenges, please read on......

5 Ways to Protect your Profit Margins from Inflation

1. Review and Adjust Your Pricing Strategy

Many SMEs hesitate to raise prices, but failing to do so can cause serious long-term damage to profitability.

Consider;

• Moving to value-based pricing for services where possible – (what the customer/market is willing to pay, rather than a cost plus fixed margin pricing policy)
• Introduce tiered packages or different service levels – give the customer choice.
• Communicate any price increase changes clearly, and link price increases to added value and improved quality your business delivers. Make sure within your communication you justifying your price rises against rising input costs. Note; your clients will be going through the same costs increases challenges

2. Reduce Costs by Renegotiating with Suppliers

If and where possible, regularly review your supplier contracts and seek opportunities to reduce costs:

This could be;

• Renegotiating delivery and payment terms with existing suppliers.
• Explore options to bulk buy or consolidated purchasing with other businesses you know & trust. (a co-operative purchasing approach).
• Consider switching to local suppliers as often they are keen to grow their businesses locally. Don't forget about the benefit of the "sticky pound". For every £1 spent with a local independent business, 70 pence stay locally, whereas if that £1 is spent with a national /international organisation only 43 pence stay locally.

3. Improve Operational Efficiency

Cutting waste and improving internal processes can create significant savings over time and can be achieved without cutting corners on your quality or levels of service.

For manufacturers: implement lean production techniques, look at ways to reduce rework, revisits and rectification,  and monitor machine and productive personnel utilisation. 

There's plenty of independent specialist consultancy support and knowledge out there to help you map out and evaluate internal cost savings opportunities.

For B2B service firms: consider automating administration tasks, streamline the client onboarding process, and explore, trial and utilise digital tools to boost team productivity. Again, reach out to those local specialist consultants.

4. Monitor Margins and Track Cost Trends Regularly – "What gets measured gets done"

Make sure you're not making assumptions about profitability.

Therefore,

• Establish regular reviews of your financial data, i.e. Business information (BI).
• Track margins, such as gross and net profit by product, service line or sales channel.
• Identify rising costs early, and ensure you respond before theses increases in costs impact cash flow.
• Use forecasting tools to model future scenarios. There are many online systems which link to your accounts system.

"Cash is King"

5. So, Strengthen Cash Flow to Withstand Volatility

Inflation is like a slow leaking dam, you may not notice for a good while that the water level is reducing, then there is a sudden realisation that's something wrong. Sometimes it can be too late to rectify or will take a surmountable amount of effort, time and money to build those reserves back up.

So, if you have realisation that inflation is eating away at your bottom line today, which no doubt is causing you cash flow stress:

• Tighten credit control and reduce debtor days.
• Align payment terms with your cost structure.
• Explore short-term working capital solutions or finance options.

And do keep an eye on supplier costs and if outgoings rise faster than customer payments coming into the business – Act now.

Inflation Doesn't Have to Destroy Your Business Margins

While inflation remains a challenge for UK businesses, it's not unbeatable. By reviewing your pricing, reducing unnecessary costs, improving efficiency, and staying on top of your financials, you can protect your margins and improve business resilience.

Personally, I've worked through high inflation periods in large organisations in the past and over these last few years I've shared my knowledge and experience to help some local business owners navigate inflation and cost pressures with practical, strategic advice tailored to their sector.

So, whether you're in B2B services, manufacturing, or wholesale, if you're feeling the pinch right now,  due to higher business costs, do just give me a shout.  As I'm here to help you review, adapt and get your business back on track, and be sustainable for the long term.

Author; Peter Fleming

Date;  5^th June 2025.

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