After the recent interest rate cuts in May 2025, big news from the International Monetary Fund (IMF) is that the Bank of England might cut interest rates three more times this year, even though UK inflation remains higher than expected. So what will that mean for local businesses, especially medium sized enterprises.

Looking at the economy in general inflation is now projected to hit 3.1% in 2025, to put this in perspective it will probably be the highest among advanced economies. This is mainly due to rising energy and utility bills so our first piece of advice is do what you can to reduce these energy and utility costs via savings or getting the best deals on current supply.

But it’s not all bad news, the IMF thinks this increase is only temporary. By 2026, inflation could settle at around 2.2%, bringing it much closer to the Bank of England’s target.

So, what does this mean if you’re running a business? Here’s the lowdown on what you can do to take advantage of interest rate cuts.

What Interest Rate Cuts Could Actually Mean for You

• Cheaper borrowing - Loans and credit could become more affordable, which may help with investment, expansion, or cash flow.
• Short-term margin reductions - Despite the rate cuts, those rising energy and utility costs could still put a dent in your margins so play close attention to your margin returns.
• Global uncertainty - New US tariffs and ongoing trade tensions may hit supply chains, exports, or customer demand, depending on your industry. So keep an eye on what’s happening in the supply chain.

On the growth front, the IMF has downgraded the UK’s 2025 forecast from 1.6% to 1.1%. It’s a slowdown—but the UK is still projected to outpace France, Italy, and Germany when it comes to growth so make sure in the planning forecasts you use these as a minimum figure. And if Europe is high on your list of export markets just be aware that demand might not be so high.

The Bottom Line

Even with interest rates possibly dropping in the UK here are three things to watch for in 2025

• Stay alert to cost pressures, especially energy-related ones and make sure supplier price increases are kept to a minimum.
• Keep an eye on global developments, the world is a much smaller place than even a decade ago. We all now need to know what’s happening overseas and not just round the corner. Foreign competition could directly impact your business, so pay attention to industry and international news sources.
• Focus on strong financial planning and resilience to navigate any uncertainty ahead. By not having serious cash issues you avoid lenders and by paying attention dodge bad debts.

And the good news? By staying alert, being flexible, and proactive, you’ll put yourself in the best possible position not just to survive, but maybe even to thrive. And if you need help spotting risks (or opportunities) for your business or just planning your way through what is happening get in touch, we’d love to help you work through what is going to be a challenging time for most businesses. If you need our assistance call us on 01482 772261 or email info@kaizengroup.uk for a free consultation visit.

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