Rising business costs in the new fiscal year

Rising business costs in the new fiscal year

April 22, 2024

The signs are that the worst of the cost of living crisis may be over for consumers, with CPI inflation at 3.4% in February now well below the rise in average pay of 6.1% for those in work. Pensioners have seen a huge hike of 8.5% and most benefits have been uprated by 6.7%.

If only the situation facing businesses was so relatively rosy, the positive noises about the UK economy emanating from pretty much every pundit and financial institution including the Bank of England might ring more true.

The reality is that our hard-pressed business community is facing a toxic mixture of widespread cost increases from this April, which it will find difficult to mitigate and which will push too many over the financial cliff at a time when business failures are already at record highs.

Rising business costs in 2024/25 tax year

National Minimum Wage (NMW)

The headline increase in the NMW from April is 9.8% from £10.42 an hour to £11.44. For younger workers aged 22 and under, the rise is higher at 14.8% for 18-20 year olds and 21.2% for those aged 16 or 17.  These are the largest ever increases in the NMW, which was first introduced in 1999.

The Low Pay Commission estimates that the NMW applies to 6.7% of jobs across the whole economy, but of course the penetration is far higher in certain sectors, in particular hospitality, retail, leisure and some manufacturing sub-sectors.

Business Rates

This iniquitous and regressive tax has been the subject of vague political promises of major reform for decades now, but that prospect still languishes deep in the long grass. Instead, business rates for premises with a rateable value of £51,000 or more will go up by 6.7% in April, affecting 220,000 businesses and costing a total of an extra £1.95bn.

Estimates suggest that two already hard-hit sectors will see the least affordable increases. The bill for retail is expected to rise by £470m according to Drapers, while hospitality will pay an additional £508m based on research by Altus Group.

Business Water Rates

These have increased by 9% from April, with the greatest impact on some manufacturing businesses.

Energy Costs

Unlike for consumers, there is no price cap protection for businesses, as many found to their very considerable cost at the height of the energy crisis in 2022. Although costs stabilised in 2023 after the previous year’s volatility, they are now more than double what they were in 2021 and represent a higher proportion of business costs than for many years, if not ever before. The potential protection of the Energy Bills Discount Scheme has disappeared with the scheme’s expiry at the end of March 2024.

It is anybody’s guess what might happen to energy costs in 2024 and beyond with the present geopolitical risks in the Middle East, but the CEO of British Gas’s parent company Centrica is on record as predicting that gas prices will remain high for at least the next two years.


Consumers are not alone in seeing sharp cost increases coming through for their telecom services, especially via the mid-contract price hike allowed in almost all agreements. These also apply to business customers, who will be seeing costs rise by inflation plus 3.9% or more. Telecom costs had already gone up considerably for businesses operating post-pandemic with a WFH or hybrid staff working model, so these latest increases are from a far higher base.

Other overhead costs

Research by SAP Concur has revealed that non-direct expenses soared by almost a quarter in the financial year 2023/24. That is more than double even the peak UK inflation rate of 11.1%. There is every reason to be concerned that this trend will continue in 2024/25.

Can businesses raise prices to recover these extra costs?

Office for National Statistics’s March 2024 Business Insights and Conditions Survey appears to suggest that almost half of UK businesses do not want to raise prices to compensate for cost inflation.

18% of surveyed businesses reported that they intended to increase prices in April 2024, but 47% said they would not. Looking at the sector breakdown, some industries are more bullish about imposing price rises:

  • Hospitality – 35% of businesses intend to raise prices
  • Retail – 23%
  • Manufacturing – 21%
  • Construction – 19%

Others are more cautious:

  • Professional services – only 14% will increase fees or prices
  • Arts & entertainment – 12%
  • Logistics – 10%
  • Property – 7%
  • Education – 7%

Taking advice on rising business costs

It’s difficult to see how these many cost escalations can do anything except damage the profitability of any business without the blessing of having a price-sensitive customer base. Some, especially in hospitality, will be forced to reduce the scale of their operations. Many will see both profit margins and bottom-line profits shrink and even disappear. A proportion will find that even with every possible tweak and adjustment, their business model is no longer viable.

Keeping a very close watch on cash flow, costs and profitability is the best way to move forward through this fiscal year. The good news is that, even though times are tough, there are many options available for businesses that act on any warning signs at the earliest opportunity.  Getting an independent professional view of your situation can be invaluable and help you to find a clear path forward.


If you are seeking professional advice for your business, Opus is here to help. You can speak to one of our Partners who can discuss options with you. We have offices nationwide and by contacting us on 020 3326 6454, you will be able to get immediate assistance from our Partner-led team.