In light of a report from the Confederation of British Industry (CBI), which found that over a fifth (22%) of companies expect significant profit declines in the coming months – new research has revealed the UK industries currently grappling with the largest cost increases.
With rising inflation, ongoing supply chain issues, and further tax rises looming – experts at money.co.uk business savings accounts have analysed the latest Business Insights and Conditions Survey (BICS) to reveal the businesses facing the steepest cost hikes and offer tips to help cut costs.
The UK industries that have the most significant cost increases
|
Rank |
Industry |
Businesses where prices increased |
|
1 |
Accommodation and food service activities |
39.8% |
|
2 |
Manufacturing |
26.8% |
|
3 |
Construction |
26.4% |
|
4 |
Wholesale and retail trade & repair of motor vehicles and motorcycles |
25.9% |
Leading the ranking, almost two in five (39.8%) businesses in the Accommodation and food service activities sector saw price increases, highlighting the pressure on industries reliant on food and accommodation. Factors such as inflation in food prices, increased energy costs, and higher wages likely contributed to this figure.
Over a quarter (26.8%) of businesses in the manufacturing sector experienced cost increases. Supply chain disruptions, rising energy prices, and higher raw material costs likely played a role. These challenges make production more expensive and stretch profit margins, meaning businesses in this sector need to find ways to offset this, like streamlining operations or raising product prices.
Closely following manufacturing, 26.4% of construction businesses reported higher costs. This sector has long been affected by fluctuations in the price of materials, particularly for essentials like timber, steel, and concrete. Labour shortages and increased transportation costs have made these pressures worse, causing issues with ongoing and future projects.
25.9% of businesses in the wholesale and retail trade and repair of motor vehicles sector reported cost increases. The rising costs of importing goods, fuel, and supply chain issues likely contributed to this. Retailers often face the dilemma of absorbing or passing these costs on to consumers, which can affect competitiveness and sales. For motor vehicle and motorcycle repair businesses, higher fuel prices and increased costs for parts and materials have put additional strain on their businesses and profits.
Joe Phelan, money.co.uk business savings expert, offers his tips on how to manage business costs:
“Managing business costs is essential for staying profitable and financially stable. Here are some practical tips to help reduce expenses, save for the unexpected, and safeguard your business against cost increases:
1. Review and streamline expenses
“Regularly review your business outgoings to identify unnecessary costs. Cancel underused subscriptions or services and consider switching to more cost-effective suppliers. Negotiate with existing suppliers for better rates or discounts, especially for bulk orders or early payments.
significantly cut office-related expenses. Technology can help automate tasks and improve communication, project management, and customer service, saving time and bolstering productivity.
2. Build a financial safety net
“Unpredictable cost increases can disrupt your cash flow, so setting aside funds for emergencies is crucial. A dedicated business savings account is ideal, allowing you to access the money when needed while earning interest.
3. Budget for unexpected costs
“Create a budget that accounts for inflation or potential price hikes – secure long-term contracts with fixed pricing to protect against sudden cost increases where possible. Use different suppliers to avoid overly relying on one source, making you less vulnerable to sharp price changes.
4. Monitor cash flow closely
“Keeping a close eye on cash flow means you can address issues before they become significant problems. Accounting software like QuickBooks or Xero can track income and expenses in real-time. Understand seasonal trends and allocate funds to cover periods of higher spending. Negotiating more favourable payment terms with suppliers (e.g., extending payment periods) or clients (e.g., requesting upfront payments) could ease cash flow pressures.
“Proactive cost management and smart saving habits ensure your business stays resilient and prepared for future challenges.”