Global tensions are on track to push UK petrol prices to their highest level of 2026, as the average cost breaks 160p per litre, according to RAC monitoring.
This news follows warnings from the Bank of England about potentially higher interest rates if fuel prices remain volatile and cause inflation.
For SMEs, the higher interest rates and raised fuel prices could hit finances particularly hard, driving up operating costs alongside the cost of borrowing.
Despite this financial instability, there are options available that can save your business money in the long term.
SMEs could explore the use of Electric Vehicle schemes and expert financial guidance to offset higher interest rates and tighter margins.
Effective planning can allow businesses to enjoy more financial breathing room.
What are some hidden costs of higher fuel prices for SMEs?
Where your firm runs a fleet of vans, operates machinery or needs to heat large facilities, rising fuel prices are likely to significantly raise operational costs.
As the cost of transport is at a premium, suppliers may raise their prices, which is often felt more acutely by smaller firms.
There are these obvious costs of higher fuel prices, but also those that cause indirect financial complications.
Despite the Bank of England holding the interest rate at 3.75 per cent, it warned this will be raised if fuel prices cause any added inflation.
The resulting effect could mean that borrowing costs for SMEs jump upwards, increasing debt repayments and financing costs.
In addition, consumer demand could also weaken because households face rising fuel prices and might be tempted to capitalise on the higher interest rates.
While these factors might cause an added financial strain for SMEs, there are ways higher prices can be handled.
Electric Vehicles
Fuel prices have been especially volatile over the last few years, so decoupling your business from fuel markets can give you more financial certainty.
This can be achieved using an Electric Vehicle (EV) in your business operations, whether that means a fleet of EV vans or EV company cars.
Despite the higher upfront costs of EVs compared to petrol or diesel alternatives, lower fuel and maintenance costs might save you some cash in the long run.
One of the core benefits of EVs is their relatively low price to recharge, working out more cost-effective per mile than using fossil fuels.
EVs are often much cheaper to service, with repair and maintenance costs up to 23 per cent lower.
Advantageous Benefit in Kind rates and Government incentives mean electric company cars are more tax-efficient compared to petrol, diesel and hybrid alternatives.
If your business were to switch to EVs, it could benefit from protection against future fuel price shocks and potentially save substantial money in the long term.
How can accountants help combat tighter margins?
While our accountants can’t mystically change the economy or fuel prices, they can help a business manage costs and keep cash flow healthy.
Owing to the added risk of higher interest rates, our accountants can help your business effectively manage borrowing costs.
This might mean suggesting which liabilities should be repaid first to minimise steep interest rates or suggesting alternative ways your business can generate funding.
Through expert financial forecasting, SMEs can identify gaps in advance of payment deadlines and plan around them, so there is still money to cover costs.
In the event that fuel prices rise further and interest rates soar, our accountants can help stress test your business to help you recognise where the breaking points lie.
If you are worried about what the rising fuel prices could mean for your business, or you are considering switching to EVs, please reach out to our team today.
Don’t wait for margins to shrink further. Our accountants can help.
