How the UK’s small businesses can mitigate the impact of global economic shocks

On top of an already challenging few years for small business owners, the past few months, in particular, have been something of a rollercoaster. How can the UK’s small businesses mitigate the impact of global economic shocks?

Ongoing geopolitical tensions have resulted in rising energy costs, a shortage of raw materials and disruption to supply chains. While domestically, businesses have recently been dealing with increases to their tax liabilities. 

Amid this uncertainty, US President Donald Trump’s new international trade policies, which came into effect in April 2025, sent shockwaves through global markets in the early part of the month, leaving UK businesses facing yet another unprecedented challenge. 

Here, we recap what has been happening in the global economy this spring, how it might affect small businesses in the UK, and what business owners can do to mitigate the impact of further economic shocks.

What has been happening in the global economy?

On 2nd April 2025, President Trump announced a tariff of 10% on most goods imported to the US, with imported cars subject to a 25% tariff. 

Due to the fallout from Trump’s announcement, on 8th May the Bank of England downgraded the 2026 growth forecast for the UK from 1.5% to 1.25%, and predicted inflation will rise to 3.5% in the coming months.  

On the same day, the US and UK agreed to a reduced tariff of 10% on cars imported to the US (for a quota of 100,000 cars per year), and a zero tariff on UK steel and aluminium.

Additionally, the UK Government temporarily suspended tariffs on 89 foreign products they deemed to be “everyday essentials”, such as pasta, juice, gardening supplies, plastics and plywood. The suspension of the UK Global Tariff is expected to save UK business at least £17 million per year.

What does this mean for the UK’s small businesses? 

For UK businesses, these new tariffs mean that the cost of importing goods to the US will increase. It is thought the impact will be greatest in the manufacturing industry. If this results in price rises, it will likely have a knock-on effect on both UK businesses and consumers.

The tariffs are likely to hit small and medium-sized businesses hardest. They are less able to absorb the additional cost than larger companies, and so will likely have to pass the price on to the consumer, making themselves less competitive. 

But the tariffs might not necessarily be bad news for all UK businesses. While US tariffs have trebled to 10% for the UK, for the European Union, tariffs on exports to the US are even higher at 20%, unless a trade deal is reached by early July. This could open up opportunities with global companies looking to UK suppliers and production instead of the EU and other countries imposed with higher tariffs.  

With the US market offering less profit, foreign manufacturers may also lower prices to gain new consumers elsewhere. The UK could benefit from lower prices of goods from countries outside the US.

What can business owners do to mitigate the impact of global economic shocks?

1. Diversify export markets – Now might be a good time to explore opportunities in different countries. 

2. Build stronger relationships with suppliers – Open up a dialogue to help you understand how the tariffs might affect suppliers’ prices and whether you can do anything to minimise the impact, such as sourcing alternatives, buying in bulk or negotiating a better deal. 

3. Invest in technology to reduce costs – Whether it’s planning, marketing or finances, new technology can help automate your processes, reducing admin and lowering the cost of doing business. 

4. Enhance products to maintain competitiveness – If you need to increase prices, how can you best sell that increase to your customers? Consider simple ways you can improve your existing product to add value for the customer.  

5. Write a contingency plan – Identify key risks ahead of time, then look for ways to minimise their impact to speed up recovery if the worse happens. Find out how to create a contingency plan.

6. Improve your financial resilience – Having access to cash, capital or other resources helps to make a business more stable against external shocks.

We have found that in the five years since the pandemic, more businesses are using short-term finance or reserving balance sheet for unforeseen expenses.  

When it comes to managing day-to-day cash flow or improving your financial resilience to absorb increased costs, our finance can help. 

We have a range of products to suit your business. Find out which product is right for you, and get a decision in as little as an hour. 

14/05/25: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.