Inflation & the cost of money – how invoice finance can help

It would be fair to say things are pretty gloomy out there, and we’re not just on about the February drizzle. In the face of rising inflation and fluctuating interest rates, UK businesses are facing increasing financial pressures, none more so than those in the recruitment sector.

Cash flow management has never been more critical, with businesses struggling to balance rising costs, wage demands and delayed payments from clients.

Inflation and the rising cost of money

As of January 2025, inflation in the UK reached 3% rising from 2.5% in December 2024, and further distancing itself from the Bank of England’s 2% target. Despite multiple interest rate cuts since August 2024, inflation is expected to rise again, putting more pressure on business managing operational expenses and payroll.

Higher inflation means that everyday costs – such as office supplies, fuel and utilities continue to increase, squeezing profit margins. Additionally UK wage growth rose by 5.9% in the three months to December 2024, outpacing inflation and increasing payroll expenses for businesses. With higher wages contributing to rising operational costs, healthy cash flow is crucial for survival and growth. Added to this, borrowing remains expensive, making it harder for businesses to access traditional credit to bridge cash flow gaps. 

Invoice finance as a solution

Invoice finance provides businesses with an alternative way to maintain liquidity by unlocking the cash tied up in unpaid invoices. Instead of waiting weeks, or even months, for clients to pay, businesses can access a percentage of their outstanding invoices immediately.

Unlike traditional loans, invoice finance isn’t additional debt; it’s simply an advance on money already earned, meaning businesses can improve their cash flow without impacting their balance sheets.

Key benefits in the current economic climate

• Immediate access to funds – reduces reliance on high-cost borrowing
• Smoother cash flow – ensures wages and supplier payments are met on time
• Mitigates late payment risk – helps businesses stay resilient in the face of payment delays
• Scales with business growth – more invoices mean greater available funding.

With inflation continuing to push up costs and interest rates still relatively high, UK businesses need smart financial solutions that will support, rather than compromise growth. 

Invoice finance offers a flexible and sustainable way to navigate economic uncertainty, maintain cash flow and continue growing, even in challenging conditions.

Liquid Link, the finance division of the Liquid Friday Group, specialises in providing invoice finance for the recruitment industry. Our solutions help businesses stay ahead of financial pressures by offering fast, flexible funding combined with technology, back-office and payroll support. Find out more at Liquidlink.co.uk