Energy costs darken UK business outlook despite easing input inflation

UK businesses have become more cautious about their near-term turnover as energy costs and economic uncertainty continue to weigh on pricing, liquidity and growth plans.

Only 13% of trading businesses expect their turnover to increase in August, while 18% anticipate a decline, according to the Office for National Statistics’ latest Business Insights and Conditions Survey. The proportion expecting a fall was four percentage points higher than businesses’ expectations for July.

Actual trading conditions remained mixed. Seventeen per cent of businesses reported that turnover increased in June compared with the previous month. Among companies employing at least ten people, the proportion recording growth was higher at 28%.

Economic uncertainty remained the most frequently reported obstacle to turnover, cited by 32% of trading businesses. Larger employers were more likely to identify labour costs as their main challenge, with 36% of companies employing ten or more people reporting this pressure.

There was some easing in immediate input-cost growth. Thirty per cent of businesses said the prices of goods and services they purchased increased in June, down seven percentage points from May. However, the figure remained five percentage points above the equivalent period of 2025.

Energy remains a significant risk to margins. Almost one-quarter of trading businesses were considering raising their own prices because of energy costs, ten percentage points more than a year earlier. Nearly three in five businesses expressed some level of concern about energy prices in early July.

The ONS noted that most survey responses were received before conflict in the Middle East resumed, meaning the results may not fully capture the effect of renewed energy-market volatility. It also describes the findings as official statistics in development and advises caution when interpreting them.

For working-capital providers and trade credit insurers, the figures point to an uneven credit environment. Businesses facing slower turnover and continued cost pressure may require additional liquidity, but those same conditions can weaken payment performance and increase exposure to late or failed customer payments.

The survey covered the period from 6 to 19 July. Its results reinforce the case for closer monitoring of debtor behaviour, cash-flow forecasts and customer concentration rather than assuming that lower headline inflation will translate quickly into stronger business finances.