Atradius warns UK inflation dip may not ease trade credit pressure

A fall in UK inflation to 2.6% may provide only limited relief for businesses facing persistent financing, energy and customer-credit pressures, according to trade credit insurer Atradius.

The Consumer Prices Index rose by 2.6% in the 12 months to June, down from 2.8% in May, the Office for National Statistics said. Transport, particularly motor fuels, and food made the largest downward contributions. Services inflation remained at 3.6%, while core CPIH was unchanged at 2.8%, suggesting that underlying cost pressures have not eased uniformly.

James Burgess, head of commercial at Atradius, said “the relief of a dip in inflation is likely to be short-lived”. He pointed to Bank Rate remaining at 3.75%, higher energy bills during July and the risk that volatile oil prices could push inflation upwards again.

The Bank of England’s next rate decision is due on 30 July. Its latest published position notes that energy prices have fallen from recent peaks but remain elevated because of conflict in the Middle East, leaving businesses exposed to further movements in transport, production and utility costs.

For companies selling on credit, lower headline inflation does not immediately remove pressure from receivables. Customers may still be carrying higher borrowing costs, compressed margins and accumulated payment obligations. A supplier can therefore experience slowing collections or increased requests for longer terms even as the national inflation rate falls.

Atradius said conditions remained mixed across supply-chain disruption and trade credit insurance claims. Burgess added that “protecting liquidity and managing customer credit risk will be essential for resilience” and would influence which businesses were best placed to invest when conditions improved.

The insurer’s July economic outlook also described the global position as fragile. It said energy-market disruption had eased following a ceasefire in the Iran conflict, but renewed strikes showed how quickly pressure on oil, gas and fertiliser prices could return.

The commercial implication is a need for closer attention to debtor exposure rather than assuming the inflation decline will translate directly into stronger payment performance. Credit limits, customer concentration, collection trends and insurance coverage remain important working-capital controls, particularly for businesses operating with thin liquidity buffers or energy-intensive supply chains.