July 2026 saw the rate of inflation hit 2.9 per cent, according to the Office for National Statistics (ONS), a notable increase from June’s 2.6 per cent.
Inflation had been falling since March 2026 and the increase is being partly blamed on the increase in the energy price cap.
As it may be the case that inflation continues to rise, businesses should understand what it means for them and how to mitigate any associated issues.
How are businesses impacted by inflation?
The cost of running a business may become steeper if inflation rates increase and remain high.
This will be felt particularly keenly by businesses that are energy intensive and manufacturers, as the transport, operating and production costs can all be affected by rising energy prices.
Tight profit margins are the reality for many businesses, meaning there is often little room to absorb increased costs without further difficulty.
While it may be tempting to pass along cost increases to customers, this must be done carefully as the cost-of-living crisis and stagnating wages are also placing a notable strain on individuals, reducing their spending power.
Employees may also put pressure on employers to increase wages in order to match the rising costs and overlooking these concerns can result in your team feeling as though they are being underpaid.
A more cautious approach to recruitment is already being adopted by many employers and these challenges could see planned investments delayed in order to meet rising challenges.
Is there a way for businesses to lessen the effect of inflation?
Keeping a close eye on cash flow and continually reviewing your budget is the most effective way to manage the ongoing issues caused by rising inflation.
It is vital that you understand where costs are rising most quickly, as this information can allow you to plan for targeted savings and efficiencies.
Pricing strategies should form part of the consideration, but decisions need to be made to preserve profitability while allowing your business to remain competitive.
Although it can feel intimidating to invest when times are tough, smart investments in technology can boost efficiency that may help to further manage expenditure so that you are better able to control the impact of rising costs.
Our team are here to support you, no matter whether interest rates rise or fall.
We appreciate that the increase to 2.9 per cent might not sound like a major change, but knowing how it will affect your specific business is vital if you wish to remain resilient in trying times.
With comprehensive financial forecasting, our team can help you manage your cash flow and support you in being more confident with the future of your business.
Speak to our team for ongoing cash flow support.
