Rising costs, weak growth, and fragile supply chains demand more than blunt cost-cutting. We explore five smarter responses for business leaders.
The UK is not officially there yet, but warning signs are hard to ignore. Inflation is well above the Bank of England’s 2% target, while GDP growth slowed in Q2. At the same time, consumer spending is softening, and supply chain disruption remains widespread.
Evidence of Growing Stagflationary Pressure
- Inflation stuck high at 3.8% in Aug 2025, well above BoE’s 2% target (ONS)
- Growth slowing with GDP up just 0.3% in Q2, down from 0.7% in Q1 (ONS)
- Consumer demand weak, retail sales +0.5% in Aug but volumes remain subdued (ONS)
- Borrowing costs elevated, 30-year gilt yields ~5.5% after Sept spike to 27-year high (Bloomberg/Trustnet)
- Businesses under strain, 47% report rising supply chain disruption (Ivalua, 2025)
For business leaders, the risk is clear. Rising costs and slowing demand are already creating a double squeeze that erodes margins, tests supplier relationships, and exposes every inefficiency in the supply chain. Whether or not we call it stagflation today, the pressures are real and growing.
Stagflationary Pressures Businesses Can’t Afford to Ignore
Stagflation pressures don’t exist in isolation. Alongside wider geopolitical and trade challenges, businesses are already feeling the effects across multiple layers of their supply chains; the effects are immediate and multi-layered. Inflation continues to bite across energy, transport, packaging, and raw materials, leaving many unable to pass costs on without losing customers. Weak consumer spending is translating into unpredictable order volumes, making forecasting harder and working capital more constrained. Smaller suppliers are particularly vulnerable, with higher borrowing costs making credit harder to secure and increasing the risk of disruption. And every inefficiency, from outdated contracts to poor demand planning, is magnified.
Why Blunt Cost-Cutting Backfires
When margins are under pressure, the instinct is often to cut costs across the board. While understandable and maybe necessary in the short term, this approach could be devastating in the longer term. Squeezing suppliers too hard risks undermining quality and service or even pushing smaller partners into insolvency. Delaying investment in systems, people, or resilience leaves businesses exposed to future shocks. Blanket freezes can also paralyse innovation at the very moment organisations need it most.
The reality is that indiscriminate cost-cutting rarely builds resilience. What leaders need instead is sharper visibility: the ability to see exactly where inflation is biting, where inefficiencies exist, and where strategic investment is still warranted.
Five Practical Moves for Supply Chain and Operations Leaders
Executives can’t control macroeconomics, but they can control how they respond. In the UK and across global markets, we see five moves consistently delivering impact:
1. Pinpoint the pressure points
Use spend analytics and predictive tools, including AI, to understand current and future spend by category and supplier. This not only shows where inflation is hitting hardest today but also highlights where future risks or opportunities are likely to emerge.
2. Balance cost and resilience
Move beyond “lowest cost” sourcing. Explore dual sourcing, regional diversification, or contract redesign to spread risk while maintaining competitiveness.
3. internal capacity with external managed service expertise
When internal teams are already stretched, external specialists can accelerate analysis, run tenders, or deliver cost reduction through procurement outsourcing and managed services.
4. Link supply chain to strategy
Data-driven insights help leaders decide where to invest for growth, where to consolidate, and where to pause. Making supply chain a board-level discussion ensures decisions align with business objectives, not just short-term savings.
5. Stress-test supplier networks
Scenario planning can expose where your suppliers are most vulnerable to higher borrowing costs or demand volatility. Acting early and working with them prevents disruption later.
Our Point of View
The challenge for businesses isn’t simply inflation or weak growth; it’s the combination. Stagflation exposes weaknesses in supply chains, but it also highlights the value of better data, sharper analysis, and pragmatic execution.
At FourCentric, we’ve seen first-hand that organisations who invest in clarity and resilience during difficult periods emerge stronger. By combining hands-on category expertise with powerful analytics platforms, we give business leaders the insight and resources they need to take action.
Acting Decisively Amid Uncertainty
Stagflation isn’t a reason to stand still; it’s a prompt to rethink. For executives and supply chain leaders, the focus should be on clarity, resilience, and action. Those who respond with evidence-led strategies and targeted execution will not only weather the storm but position themselves for long-term advantage.
Sources
- Office for National Statistics (ONS), released 20 August 2025, ONS website, statistical bulletin – Consumer price inflation, UK: August 2025
- Office for National Statistics (ONS), released 30 Jun 2025, ONS website, statistical bulletin – GDP quarterly national accounts, UK: January to March 2025
- Office for National Statistics – Retail Sales Index UK: January to June 2025
- Ivalua – UK businesses in the middle of a chain reaction with nearly half experiencing a surge in supply chain disruption
- Bloomberg/Trustnet, September 2025 – Is a 2022-style gilt sell-off on the horizon?
Struggling with rising costs and falling demand?
By combining procurement expertise, supply chain insight, and advanced data analytics, we work in partnership with leaders to build clarity, resilience, and decisive action. Email: info@fourcentric.com