In 2025, UK businesses are grappling with several well publicised cost challenges and pressures that significantly impact their operations. Many of the these increases have come about as a direct result of national budget and policy changes, these include:
Increased Employer National Insurance Contributions (NICs):
The October 2024 budget raised employer NICs, adding £5 billion to retailers’ staff costs in 2025.
Rising National Minimum Wage:
A 6.7% increase in the national minimum wage has elevated payroll expenses for retailers.
Elevated Energy Costs:
The energy price cap is set to rise by 6.4% in April 2025, increasing operational expenses for retailers.
Business Rates Adjustments:
Changes in business rates, including a reduction in discounts, have led to higher property-related costs for retailers.
Let’s be honest here, there is little the team here at Ebit can do to address these challenges for you, however, there are many other pressure that businesses are facing and we are delivering innovative solutions to drive improved supplier performance and reduce costs across the range of indirect products and services.
Effective procurement strategies will help businesses mitigate these pressures by optimising costs, improving supply chain resilience, and enhancing operational efficiencies. Here’s how:
Inflationary Pressures: The Consumer Prices Index (CPI) rose by 3.0% in the 12 months to January 2025, increasing the cost of goods and services.
- Strategic Supplier Negotiations: Long-term contracts and consolidated purchasing can help secure favourable pricing and protect against price fluctuations.
- Alternative Sourcing: Identifying new suppliers, adopting emerging technologies and suppliers can be an effective route to lower costs
- Value Engineering: Working with suppliers to redesign products or packaging to reduce material costs without compromising on quality or environmental aims
Supply Chain Disruptions: Ongoing global supply chain issues have led to increased costs for sourcing and logistics.
- Diversified Supplier Base:
Reducing dependence on a single supplier or region minimizes risks from geopolitical instability or logistical delays. - Nearshoring & Local Sourcing: Sourcing closer to home reduces transit times, lowers shipping costs, and increases supply chain reliability.
- Inventory Management: Investing in demand forecasting tools and safety stock strategies to ensure buffer inventory during disruptions.
Increased Regulatory Compliance Expectations: New employment legislation and other regulatory changes have introduced additional compliance expenses.
- Automated Procurement Systems:
Digitizing supplier onboarding, contract management, and compliance tracking reduces administrative overheads. These technologies can also be used to improve ongoing supplier audits - Collaborative Industry Networks: Partnering with industry groups can help businesses stay ahead of regulatory changes and share best practices.
- Sustainable & Ethical Sourcing: Consumers are increasingly favoring retailers with strong sustainability practices—procurement can support this through ethical sourcing and eco-friendly packaging.
Declining High-Street Footfall: Reduced in-store customer visits have impacted sales, affecting profitability. Whilst most retailers have adopted an omni channel sales approach, procurement can be someway behind
- Omnichannel Procurement Strategy:
Ensuring suppliers support both in-store and online models (e.g., flexible inventory management, faster fulfillment). - Optimized Category Management: Prioritizing high-margin or fast-moving products to align stock with evolving consumer preferences.
- Supplier Partnerships for In-Store Innovation: Collaborating with suppliers to introduce in-store experiences (e.g., pop-ups, interactive displays) to attract footfall.
Technological Investments: The need to invest in digital platforms and cybersecurity measures has increased capital expenditures. With the growth of AI representing a potential step change in the way technology is deployed across businesses investment in this area is growing
- Cost-Sharing with Suppliers:
Partnering with suppliers on technology initiatives, such as RFID tracking or AI-driven demand planning. - Procurement Process Automation: Using AI and data analytics to streamline procurement, reduce manual work, and optimize supplier selection.
- Leverage Procurement-as-a-Service (PaaS): Outsourcing certain procurement functions to specialized providers can reduce costs and increase efficiency.
By leveraging data-driven decision-making, supplier collaboration, and technology integration, procurement can be a strategic enabler to help retailers navigate these cost pressures effectively.
