A new report from Ivalua, a global leader in spend management, has found that 71% of UK businesses say they have passed increased costs onto customers, equating to 4.04m UK companies*.
Ahead of next week’s budget, there are concerns that tax rises will result in increased costs for UK PLC, which again will be passed onto households.
Amidst this budget uncertainty, UK businesses have been scrambling to drive down prices, with 73% saying lowering costs has become more of a priority in the last 12 months.
Yet 68% believe this blinkered focus on cost reduction will harm the business in the long run.
Ivalua’s report, Managing Cost Without Compromise: Sustaining Margins While Staying True To Values, surveyed 300 UK supply chain and procurement decision makers. It found that cost pressures don’t just impact the business and their customers, but can ripple across supply chains, putting the stability of suppliers at risk. Key findings show that:
- Suppliers hanging by a thread: 55% of UK businesses say it’s only a matter of time until some of their key suppliers go under due to cost pressures
- Cost focus negatively impacting suppliers: 36% of UK businesses say some suppliers have already gone out of business, while 19% have had suppliers cut ties with them
- Supplier engagement increasing: 61% of UK businesses say cost-cutting has resulted in them collaborating more closely with suppliers to reduce overall costs
“The future prosperity of UK businesses is at stake,” Ian Thompson, VP of Northern Europe, Ivalua. “
With cost-cutting a top priority for UK firms, the Budget’s biggest impact will come from measures that reduce input costs. But with potential tax rises, it’s fair to wonder how much more UK PLC can take before they simply pass more costs on to their customers. After a year of persistent inflation raising the cost of raw materials, US tariff chaos and shifting trade policies, and conflicts in Europe and the Middle East, businesses don’t need further cost volatility. They need reassurance and support to help the UK grow.”
While cost-cutting may deliver immediate relief, it often exposes the business to long-term risks such as supply chain fragility and increased compliance risk as ESG standards take a back seat. As part of efforts to cut costs over the past year, UK businesses have chosen to cut back or delay green initiatives (41%) and supplier due diligence checks on labour standards and emissions (33%).
This ESG backslide lands at a time when UK businesses should be maturing their baseline reporting, with the FRC finding that only half of in-scope companies disclosed both targets and progress KPIs, with several providing no scenario analysis.
To uncover and manage long-term supplier savings, UK businesses are taking a more structured approach. Over half (52%) are working directly with suppliers to lower production costs for both sides, while 45% are using bulk discounts to reduce overall purchase costs and 32% are using early-payment plans to bring down total purchase costs.
“Amid relentless cost pressures, the acid test for the next Budget is simple: will it lower costs without loading new burdens on UK firms and households?” asks Thompson.
“After years of uncertainty, businesses will naturally look to slash costs, but they must do so sustainably. Procurement has a central role to play by treating suppliers as peers. With sharper visibility across spend and suppliers, businesses can make smarter decisions through bulk buys and early-payment savings, without weakening supply chains or ESG standards. Rather than aggressive cuts that risk reputational damage or supplier disengagement, UK businesses must make far-reaching decisions that deliver savings while bolstering the supplier and customer relationships that underpin economic growth.”
