The increase to National Insurance (NI) to 15% announced during the last Autumn Budget comes into force on 6 April 2025. With employer contributions going up, it is set to place additional strain on UK businesses: especially those with high staffing costs. Coupled with a 6.7% rise in the minimum wage, it’s likely that this change will significantly impact cashflow and working capital for many if not most.
While the coming months are likely to be challenging, it’s not all doom and gloom as there are ways to prevent any cashflow pitfalls that could be devastating. Ultimate Finance’s Senior Regional Director David Moran gives his view of how businesses are likely to be affected by the changes, and how they can mitigate the challenges ahead.
The impact on businesses
A parallel challenge for employers is the upcoming minimum wage increase, scheduled for 1 April. This will compound the cash impact, and force many businesses to reconsider their cost structures to make up for the increase in overheads. With many companies already facing rising operational costs, this change adds another layer of financial pressure.
The broad knock-on effect of these changes is likely to be a further dip in business confidence, especially after a sharp drop of -47 points at the end of the first quarter. I expect many firms will pause big decisions until there’s more clarity on how the economic landscape will settle.
From my experience, I’d expect uncertainty to last for at least two to three months while the UK economy adjusts to this new norm. Spring might be a turbulent period, but UK businesses have a long track record of resilience. I’m confident we’ll see a more stable and optimistic outlook in the latter half of 2025.
Ease the pressure of higher NI costs with Invoice Finance
One of the biggest concerns I’m hearing from business leaders is how to maintain liquidity while absorbing these increased costs. For businesses that sell to other businesses on credit, Invoice Finance is proving to be an ideal funding solution.
By unlocking cash tied up in unpaid invoices, businesses can bridge the gap between providing services and receiving payment, meaning they have the funds available to cover payroll and other operational expenses.
At Ultimate Finance, we know that businesses need more than just a funding solution – they need a financial partner that can support their ambitions in the long run. Unlike rigid overdraft facilities, Invoice Finance provides a flexible and tailored approach, allowing businesses to access funds quickly when needed.
Our relationship-driven approach means clients have regular open conversations with their Relationship Management team about opportunities and challenges, and we can work together to find solutions that work for their business – not just a one-size-fits-all approach.
Proactive steps businesses can take – David’s Tips
Beyond securing working capital, there are other practical steps I’d recommend businesses take to mitigate the effects of the NI and minimum wage increases:
- Check client creditworthiness – Before offering credit terms, ensure that customers have the ability to pay. Setting appropriate credit limits and sticking to them can help avoid bad debt.
- Tighten credit control processes – Implement strong credit control measures, including prompt invoicing, clear payment terms, and chasing on past-due debts.
- Manage supplier relationships – Paying suppliers on time maintains continuity in the supply chain and fosters goodwill. If cashflow becomes tight, open communication is crucial on any delay in payment.
- Consider debtor protection – Businesses may benefit from debtor protection to safeguard against late or missed payments. At Ultimate Finance, we offer this as a bolt-on option to our Invoice Finance solutions.
- Review pricing strategies – With rising costs, businesses must decide whether to absorb them or pass them on to customers. Striking the right balance is key to maintaining competitiveness while protecting margins.
- Engage with us as early as possible – Our team is committed to working closely with existing or new potential clients to offer flexible funding options that align with their needs. The sooner we understand your challenges, the better we can provide support.
Keeping your business moving with Ultimate Finance
British businesses are resilient. We’ve seen it time and time again – through the pandemic, Brexit, spiraling energy costs and countless other economic challenges. Businesses that adapt quickly and secure the right financial support often emerge stronger on the other side.
At Ultimate Finance, we’re committed to supporting our clients through these shifts by providing tailored working capital solutions that help them remain agile and resilient. Rising costs in April will create a tough environment, but with the right financial strategy, strong credit management, and a flexible funding partner, businesses can position themselves for growth in the latter half of 2025.
If you’d like to discuss how Invoice Finance can help your business or clients navigate these changes, speak to your Relationship Management team. Or, if you’re not yet an Ultimate Finance introducer or client, get in touch.
About David Moran
David has 30 years of experience in Invoice Finance, with a career spanning Origination, Risk, and Portfolio Management – both on the ground and leading teams. His deep understanding of business finance and strategic decision-making makes him a trusted voice in the industry. Outside of work, David’s determination extends to his personal life – he once completed a 100km ultra marathon, proving he’s not one to back down from a challenge.
