Inflation Is Rising Again—and It’s Hitting Business Costs
As we wrap up May, the UK economy is sending mixed signals—some positive, others more challenging. Whether you’re building a high-growth startup or running a profitable small business, knowing what’s going on in the broader economic landscape helps you make sharper decisions.
Here’s what’s happening right now—and what you can do about it.
After months of easing, inflation is creeping back up. According to the Office for National Statistics, prices rose 3.5% in the 12 months to April, up from 2.6% in March. That’s the fastest increase we’ve seen since early 2024.
A few key factors are driving this spike:
What this means for you: You’re likely to feel this in rising operating costs, from energy bills to supplier deliveries. This is a good moment to audit expenses, talk to your accountant, and revisit any pricing strategy to protect your margins, without scaring off customers.
Despite the inflation bump, growth numbers were better than expected. The UK economy expanded by 0.7% in the first quarter of 2025, according to the ONS’s latest GDP data. This is a notable bounce from near-flat growth in Q4 2024.
That growth came mostly from increased spending in the services sector, with household consumption also picking up.
What this means for you: There may be signs of life in consumer demand, especially if you’re in e-commerce, retail, or hospitality. You could consider reinvesting in marketing, testing a new product, or cautiously reopening paused growth projects. But don’t bet the farm just yet.
In April, the UK government borrowed £20.2 billion, a figure that shocked analysts. As reported by The Guardian, this is the fourth-highest April borrowing total since records began in 1993. Much of the extra spending went toward public sector wages and inflation-linked benefits.
Why this matters: Big borrowing now could mean tax rises later, likely in the autumn budget. Founders should prepare for potential changes to corporation tax, capital gains, or R&D incentives. If you’re planning a raise or a sale later this year, this could influence valuations and timing.
While headline growth looks healthy, the private sector is feeling strain. A recent report by S&P Global found that UK manufacturing output is falling, and the sector is shedding jobs at the fastest rate in five years. The broader business activity index dipped below 50, suggesting contraction.
What this means for you: If you’re in a product-heavy business or relying on domestic B2B customers, expect caution in the market. On the flip side, the softening job market might help you access better talent, especially as larger firms tighten headcount.
One bright spot: the UK is re-engaging globally. Over the past month, it has secured fresh trade deals with the European Union, India, and the United States.
The new EU agreement aims to ease post-Brexit friction, while the India and U.S. deals are designed to improve market access and streamline regulations. According to both the World Economic Forum and the White House, these agreements are aimed squarely at revitalising UK trade flows.
What this means for you: If you’ve been eyeing international expansion, this could be your moment. Exporters and service-based businesses alike should review these deals and consider whether new customers, suppliers, or partners are now within reach.
With costs rising, taxes uncertain, and growth patchy, it’s not the time for panic, but it is time to tighten your game.
1. Audit Your Costs
Inflation is eating into margins. Take a fresh look at energy, logistics, and staffing. What can you trim, renegotiate, or defer?
2. Plan for Tax Changes
Speak to your accountant about potential tax impacts later this year. Build optionality into your cash planning and fundraising timelines.
3. Stay Flexible on Hiring
If you’ve been planning to hire, great—but consider doing it in stages. The talent market may get more competitive in the coming months.
4. Talk to Customers
Whether it’s price increases, delivery delays, or product changes, communicate clearly and early. Transparency builds loyalty.
5. Explore New Markets
If you’re stable at home, look abroad. The new trade deals may give you a leg up in markets that were previously harder to reach.
The macro picture is shifting again. Inflation’s rising. Growth is holding for now. Taxes could change soon. It’s a moment for sharp focus, not false confidence.
At ImpiCapital, we help founders and operators make smart financial decisions in times like these. If you’re preparing to raise, planning an exit, or just need to sense-check your next move, we’re ready when you are.
Reach out for a chat → hello@impicapital.com