Inflation is rising: What should business owners be preparing for?

The BOE usually doesn’t make cuts to interest rates when inflation rises. Although this may seem counterproductive at first glance, this strategy aims to stop inflation rising even further by affecting consumer spending habits. 

For example, food prices have risen sharply over the past few years, and this has caused consumer behaviours which typically lead to even higher inflation. If people expect food prices to keep rising, they may: 

• Ask for higher wages
• Spend quickly to avoid further price increases
• Be less inclined to save or invest their money

 To combat this, the BOE does not want to cut interest rates because lowering interest rates would make borrowing cheaper and spending easier, which (if consumers behave in the typical fashion) would make inflation worse.  

Not at all, there are too many contributing factors to inflation to note. Some of the most impactful factors in September 2025 included: 

1. Ofgem announced another increase in the energy price cap of 2% set to take effect this winter – a decision which has also contributed to the September inflation rise.
2. The Retail Price Index – another way of measuring price rises which includes home ownership costs such as mortgage interest and insurance – reached 4.8%, indicating the average cost of living has risen by nearly 5% compared to last year.

Borrowing costs, including loans and overdrafts, will remain high, meaning clients might be wary about investing or hiring due to the cost of capital. Many business owners will face cash flow pressures due to elevated repayments on variable-rate debt – a common form being commercial mortgages. A further reduction in consumer demand is also to be expected, with businesses in retail, hospitality, and discretionary services likely to be most affected.

Higher financing costs for landlords and property developers, which could lead to property values stagnating or declining as borrowing remains expensive.

Personal finance strain with the increasing cost of mortgage repayments, especially on variable rates.