Navigating a business through today’s economic challenges

This is a challenging trading period for British companies, young and old, as the tax burden grows heavy on companies, along with changing rules on international trade with the US and challengingly high inflation. With today’s economic pressures shrinking bottom lines, UK businesses must develop a tactical strategy to remain viable, ambitious and on track for growth.

Gillian Sayburn, Director at Begbies Traynor Group in Newcastle, who also operates across the North East, assesses how to navigate a business through today’s challenging economic conditions.

The increasing cost of doing business

The cost of doing business is intertwined with the rate of inflation, so as businesses navigate a high-pressure environment due to high inflation, they must consider how this will impact their profit margins. High inflation ultimately increases operating costs, which raises the price of products and services, and therefore drives down customer appetite. This can have a serious impact on business performance and profitability as companies absorb rising costs.

Higher taxes for UK businesses

Business taxes are increasing across the board and fuelling a greater financial burden on UK companies. With businesses now facing higher taxes, the threat of insolvency naturally sits high. We look at company insolvency statistics to paint a picture of the financial health of British businesses.

According to the Red Flag Alert report for Q1 2025 from Begbies Traynor Group, the number of businesses in ‘critical’ financial distress rose 13% year-on-year in Q1 2025, with 45,416 companies now affected, compared to 40,174 in Q1 2024. Companies in ‘critical’ financial distress refers to businesses edging towards insolvency as a result of severe financial distress.

British businesses, particularly employers, will see overheads significantly increase due to higher Employers’ National Insurance Contributions and National Living Wage. To cope with rising labour costs, businesses may consider raising more funds or revising employee numbers.

A changing international playing field

The US waged war on international trading partners after announcing a series of fresh and non-forgiving tariffs, ranging from a universal 10% tariff on most UK exports to sector-specific tariffs. While a successful UK-US trade deal has been negotiated, eliminating tariffs initially imposed on selected sectors, the universal tariff remains. This will inevitably bite into profit margins for businesses relying on exports to the US, increasing the cost of operating in US markets.  

We look at how UK businesses hard-hit by US tariffs can mitigate the impact.

Revise and renegotiate contracts with trading partners and suppliers – Businesses may feel the impact of US tariffs directly through higher overheads, or indirectly through price increases passed through the supply chain.

Streamline company operations – Streamline company operations to increase operational and structural efficiency. This may involve finetuning or disposing of areas that are inefficient, overly complex or underperforming. This restructuring exercise can help divert cash to areas most in need.

Business finance – If companies require a cash injection to overcome financial challenges, clear up a debt backlog, or get up to speed with company finances, they may consider business finance. This can be tailored to the business based on their needs, such as asset finance to help purchase a company asset, or invoice finance to plug a gap between invoice payments.  

Pass on costs to customers – Companies unable to absorb rising costs may mitigate the impact by raising their prices or tightening up terms. While this option can help businesses offset rising costs, this door may be closed for some already in cold waters with customers.

A snap poll conducted by the Manchester Chamber of Commerce found that 62% of UK firms across the UK with trade exposure to the USA will be negatively impacted by US tariffs, increasing to 75% for businesses based in the North of England.  With the impact of the US tariffs likely to be felt far and wide, businesses must formulate an action plan to contend with rising costs. If your company is at high risk of becoming insolvent due to today’s economic challenges, get in touch with Gillian Sayburn of Begbies Traynor Group to arrange a free, confidential consultation. The earlier professional support is sought, the greater the options available to you.