As UK employers face rising costs from increased National Insurance contributions and the national living wage, a leading business finance expert is warning startups to prepare for serious cash flow challenges.
Mark Kozo, Commercial Director at Approved Business Finance, said many businesses are scaling back hiring or planning redundancies to control costs. However, he cautioned that a reduced headcount combined with overburdened employees could create deeper cash flow and capacity problems throughout the year.
“Upskilling staff is a good strategy, but without the right support, it can lead to burnout, higher staff turnover, lower business output and unexpected costs associated with rehiring and training,” Kozo said.
New research from Approved Business Finance highlights a cash flow crisis across most UK sectors in early 2025 as winter pressures, delayed payments, and rising costs collide to strain financial resources. While many industries typically recover in spring, record-high cost expectations in March suggest this year will be different.
According to the ONS, 67% of UK businesses with 10 or more employees expect their staffing costs to rise due to April’s tax changes, and 26% are considering redundancies.
“Without a contingency plan for times of financial instability, these staffing changes could destabilise business operations just as costs are peaking,” Kozo warned.
The Institute of Directors’ Economic Confidence Index also reflects these worries. In March, cost concerns hit a record high, with 77% of business leaders citing the biggest issue as labour costs (including tax), 36% flagging supply chain inflation, and 34% pointing to energy costs.
Five essential cash flow tips for businesses
To manage financial uncertainty in a business, Kozo shared five cash flow strategies to strengthen financial resilience:
- Build a cash reserve: Save 15 – 20% of surplus holiday revenue to buffer slower months, especially in retail or manufacturing.
- Shorten payment cycles: Break large invoices into smaller installments and offer early payment discounts to accelerate income.
- Plan and forecast: Use project management tools to adjust inventory and staffing based on seasonal trends.
- Secure external financing: Consider invoice factoring, asset finance, or bridging loans to access working capital when needed.
- Retain key staff: Don’t overlook the long-term cost of losing experienced workers. Proactively manage retention to avoid rehiring and training costs.
Kozo added: “Businesses must prepare now for rising cost concerns. Good cash flow management isn’t just about staying afloat – it’s about staying ready to grow when the time is right.”
