1. Introduction
As we bear toward the end of this financial year, many businesses are preparing for the changes ahead in April. One noticeable change will be the employer's NI contributions. However, this won't be addressed in the following paragraphs; if you wish to read more about this, please refer to our blog about the budget. Instead, we will address the rising operational costs households and businesses will face in the coming months. It was recently reported that the energy regulator Ofgem will be increasing the price cap for the third straight quarter in April by 6.4% Taaffe-Maguire, S. (2025), as well as rising costs of water, insurance and some taxes means businesses need to assess their budgets and how they may be affected this year.
2. Breakdown of Rising Costs
Firstly, the rising utility bills affect businesses and households, causing inflationary pressure nationwide and tightening people's pockets. As mentioned, the energy price cap will be increasing by 6.4%, leading to an increase of £9.25 per month for average households. The price rise is reflected in increased wholesale prices caused by a spell of abnormally cold weather. However, this is 1.4% higher than analysts predicted (Millard, R. (2025)). The price cap is a limit on the price of each unit the supplier sells to the public; therefore, each person's bills are still dependent on the amount of energy they consume. Unfortunately, the cold weather has spread across Europe this winter, meaning the demand has spiked continentally. Therefore, stockpiles have been emptied (Taaffe-Maguire, S. (2025)). Consequently, as the weather warms, suppliers will wish to refill these stockpiles, meaning the demand for energy will likely not slow any time soon. Furthermore, water bills are expected to rise this year across the country; these will vary depending on your locality/provider. Find more details here; however, like energy, water bills are expected to increase on average by £10 per month. This increase is to fund infrastructure investments and improve environmental measures following the controversy highlighted in recent months. Unfortunately for some, it does not end there; some councils such as Bradford, Newham, and Birmingham are being allowed to bypass the 4.99% cap on council tax increases, as well as further smaller costs, such as phone and broadband.
3. Direct & Indirect Effects on Businesses
Simply put, many businesses' operational costs are going up in the coming months, meaning margins will be squeezed tighter again. There is, of course, the option to pass this cost on to your consumer, but you then must battle even more to stay competitive in your market. There are also some indirect effects of these inflating costs. Firstly, the general inflationary pressure will affect everyone; as mentioned, businesses have the option to pass these costs on through higher prices. Therefore, if suppliers decide this is the best option for them, then the cost of your inputs may increase. Finally, there may be one more negative effect before we move to solutions: the costs affect not only businesses but consumers too; therefore, households may make conscious decisions to reduce spending elsewhere and consequently reduce economic demand.
4. Strategies to Manage Costs
Operational strategies
There are many ways to battle with the pressure of rising costs. Firstly, operational changes include becoming more efficient with energy and water by using a smart meter to have greater awareness and tracking, installing motion sensor lights, etc. Renegotiating with utility suppliers is also possible to arrange a fixed cost and avoid these rises. Martin Lewis recommended this, saying it was a "no-brainer" to move to a fixed-rate deal (Peachey, K. (2025)).
Financial Strategies
Finance options can massively help with this issue, and there are a few paths you can take. One way to improve energy efficiency is by investing in a new asset, which will give you long-term cost savings and new, more efficient equipment. Another option is to free up cash flow, and this can be done in two ways: firstly, invoice finance; by setting up this facility, you don't have to wait for customers to get their money together and instead have your money on demand, giving you much more financial freedom. Secondly, there is a finance product which can help spread the cost of your supplier invoices. The funder will pay the lump sum to the supplier, and then you will pay a fraction in instalments over an agreed period. Both options help free up cash flow to ease the increased pressure these rising costs bring.
5. Conclusion
In summary, utility and other costs have been a drag on the country recently, and they may not let up until later in the year; this has impacted both businesses and households, putting inflationary pressure on the entire economy. The increased prices have had both direct and indirect impacts on businesses, and both are negative. However, there are ways to help ease the blow. One option is to streamline operations and become more efficient in energy use through increased awareness or more efficient equipment. You should also renegotiate your contracts if you are on a variable rate to avoid these price hikes and gain security in cash flow. The other option is to either invest in new assets to streamline operations or choose facilities to help smooth out cash flow.
With rising costs squeezing businesses from all angles, taking proactive steps to manage cash flow and improve efficiency is essential. Whether streamlining operations, securing fixed utility rates, or leveraging finance solutions to ease the burden, planning ahead can make all the difference. At Excel-A-Rate, we offer tailored funding solutions to help businesses stay in control, maintain stability, and continue to grow - even in challenging times. Get in touch today to explore how we can support your business through rising operational costs.
Reference list
Espiner, T., et al., (2025). Water, cars and phones: The seven bills set to rise in April. BBC News. [online] 25 Feb. Available at: https://www.bbc.co.uk/news/articles/cvg18pvz7kko [Accessed 27 Feb. 2025].
Millard, R. (2025). Britain’s household energy bills to rise from April. [online] @FinancialTimes. Available at: https://www.ft.com/content/93d15fe3-c174-469a-9008-57908973ce6e [Accessed 27 Feb. 2025].
Peachey, K. (2025). Energy price cap: Bills to rise by more than expected in April. BBC News. [online] 25 Feb. Available at: https://www.bbc.co.uk/news/articles/cgl0k772lwpo [Accessed 27 Feb. 2025].
Taaffe-Maguire, S. (2025). Energy bills for typical household to rise to £1,849 a year from April. [online] Sky News. Available at: https://news.sky.com/story/energy-bills-for-typical-household-to-rise-to-1-849-a-year-from-april-13316130 [Accessed 27 Feb. 2025].
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