Every UK business is feeling the strain of increasing costs right now. Coupled with the need to improve operational efficiencies (and successfully adopt the appropriate technologies), we are set for another challenging year ahead. Readers of this blog will know that we never resort to doom and gloom. Far better to approach these obstacles with solutions and best practice approaches in mind. Let’s take a look at how to tackle rising costs and digital challenges in 2025 and beyond.
Tackling rising costs
At the time of writing the autumn budget is yet to be delivered, but we know it will involve ‘difficult decisions’. Inflation dropped from its 40-year high of 11.1% in October 2022, but prices are still rising – just more slowly. The surge in 2022 was driven by increased demand for oil and gas post-pandemic and the Ukraine war. While food prices have eased, inflation remains above the Bank of England’s 2% target, with sectors like services still seeing significant price increases.
As UK businesses contend with rising operational costs, many are making strategic adjustments. According to a 2024 YouGov study nearly 60% of large businesses (those with over 250 employees) have raised prices to offset increased expenses, compared to 45% of microbusinesses (fewer than 10 employees). This trend grows with business size, reflecting the greater flexibility larger companies often have when adjusting to market pressures.
The survey found that businesses are also focusing on operational efficiencies, with 58% of large companies and 49% of medium-sized businesses cutting operational costs. Smaller companies, although less likely to make drastic cuts, are still trying to rein in spending, with 42% of small businesses and 31% of micro-businesses adopting similar measures.
Some businesses, however, particularly smaller ones, have been slower to react to rising costs. The survey shows that 33% of micro-businesses are yet to implement strategies to manage higher expenses. Only 7% of large businesses are in the same boat, indicating a proactive approach among these firms.
What can businesses do?
To cope with these pressures, businesses are adopting several strategies:
Price adjustments: Many companies, particularly larger businesses are gradually increasing their prices. While understandable, it’s important to communicate price changes transparently to customers to maintain trust. Most of us are feeling the pinch, after all.
Cost reduction: As detailed above, cutting operational expenses remains a critical strategy, particularly for larger businesses with the resources to invest in efficiency improvements. This could involve anything from renegotiating supplier contracts to optimising internal processes.
Diversification: Where possible, businesses should diversify products and services. This helps spread risk and may offer opportunities to tap into new revenue streams.
Seek external support: When going through periods of transition, many businesses find engaging consultant services beneficial. Professionals with specific experience in supply chain and procurement, digital transformation and other change-related strategies can add huge short and long-term value.
Emerging technologies and digital transformation in 2025
In a surprise to absolutely no one, AI and other digital technologies will continue to dramatically reshape UK business in 2025, driving operational efficiencies and transforming processes. According to the US International Trade Administration, the UK AI market, currently valued at over £16.8bn, will reach £801.6bn by 2035.
Sectors like IT and telecommunications, already leading in AI adoption, will likely accelerate the use of emerging technologies. In contrast, industries with slower adoption rates, like hospitality and retail will be under increased pressure to catch up as AI becomes a competitive necessity.
How businesses can prepare for digital transformation
Invest in AI and automation: A recent gov.uk report revealed that 68% of large businesses and 33% of medium-sized firms already incorporate at least one AI technology. To remain competitive, invest in AI tools that genuinely enhance data management, machine learning and natural language processing (NLP) capabilities.
Find out more about the role of AI in supply chain management.
Adopt cloud and mobile technologies: Cloud-based systems offer flexibility and affordability, improve a variety of procurement and supply chain processes, enhance transparency and enable better decision-making. They also reduce time-to-market and improve collaboration across teams.
Leverage big data and analytics: Businesses need strong, well-defined strategies to effectively manage growing volumes of data and leverage it for market intelligence and strategic planning. Predictive analytics can help companies manage inventory, improve quality assurance and make better procurement decisions, enabling them to cut costs and remain competitive.
Address Cybersecurity concerns: Cybersecurity measures, including encryption, risk assessment and network monitoring, must be integrated into all digital procurement systems to safeguard business data and protect against emerging threats.
Prepare for workforce changes: As AI adoption grows, the UK government predicts that around 7% of existing jobs could be displaced within five years. Businesses should focus on reskilling and upskilling employees to adapt to new roles.
Recruiting the right procurement and supply team for the future
Securing the top procurement and supply chain talent is critical for navigating future challenges and capitalising on new opportunities. Skilled procurement professionals bring strategic insight, expertise in supplier management and a deep understanding of market dynamics. They lead initiatives that improve cost control, quality assurance and regulatory compliance – all while driving innovation and operational efficiency.
Contact the Bramwith team today to learn how we can help you build a winning procurement and supply chain team for 2025 and beyond.