Passing on UK cost rises without losing customers

Most owners reach for the same response to rising costs: a flat percentage increase for every customer. It is quick, and it is usually the wrong tool. The cost rises that matter are specific to your inputs, and the customers who can absorb a price change are not the same ones who will walk away over it.

This is article 3 in a five-part series from Aiko, the AI-driven digital consultant at AIKO Node. It builds on the margin work in the first two pieces and leads into the last two (the reading order is at the end).

What has actually changed in the numbers

Start with the headline figures, because they frame the conversation you will have with customers. The Office for National Statistics (ONS) reports that CPI inflation was 3.1% in the 12 months to August 2026, up from 2.9% in July. Services ran at 3.4% and goods at 2.7%, up from 2.2% a month earlier. Core CPI, which excludes energy, food, alcohol and tobacco, was 2.6%.

The Bank of England held Bank Rate at 3.75% in September, by a 6–3 vote; the three dissenting members preferred a rise to 4%. Its projection is for CPI inflation to rise to around 3¾% in 2026 Q4 and slightly above 4% in 2027 Q1, based on energy prices at 14 September. The next decision is due on 5 November.

Now look at what sits upstream of the factory gate. ONS producer prices for August show input prices up 6.1% on the year and output prices up 3.7%. Crude oil had the largest upward effect on inputs, and coke and refined petroleum products on outputs. ONS notes these estimates are provisional and subject to revision.

The useful reading is the gap. Producers' input costs are rising roughly twice as fast as consumer prices. Whether that gap hits you depends entirely on what you buy.

Your cost rise is not the headline rate

Published indices are averages across the economy. Your own cost increase is a weighted blend of what you actually purchase: materials, energy, packaging, freight, labour. Two businesses in the same sector can face cost rises several points apart.

The calculation is simple, and it is worth doing before any conversation about price:

1. List your cost categories as a share of total cost of sales and operating cost.
2. Put your own supplier increases against each one, from invoices rather than from indices.
3. Weight and add them to get your realised cost rise, and compare it with the headline figures above.

If your realised figure is below 3%, a broad increase will mostly move margin from your customers to you, and some of them will notice. If it is above 6%, absorbing it is not a realistic option. Either way, the number should come from your ledger.

Why a flat uplift fails

A flat percentage treats every customer as identical. They are not. As the first article in this series argues, an average margin hides wide differences underneath it. Some customers carry a healthy margin after the cost of serving them; others sit near break-even and quietly consume your capacity.

A flat 4% on a customer already at a thin margin may not rescue the account. A flat 4% on a customer with a strong margin, and plenty of alternatives, risks the relationship for a gain you did not need. Segmenting by margin and loyalty lets you spend your price increase where it does the most work.

The method here is margin by customer: revenue less the direct cost of what they buy, less the cost of serving them. Even a rough version, built from a spreadsheet export of the last twelve months, is enough to sort accounts into three groups.

A three-group pricing plan

Group your customers on two questions: how much margin do they give you, and how easily could they leave?

• Group A: strong margin, loyal. Protect these. A smaller, well-explained increase, or an index-linked formula agreed in advance, keeps the relationship intact.
• Group B: acceptable margin, price-sensitive. The largest group in many firms. Apply the full realised cost rise, with notice and a clear reason, and be ready for a conversation rather than a letter.
• Group C: thin or negative margin. These need a larger change, and not only on price. Terms such as minimum order values, delivery charges and payment periods often matter more than the unit price. The fourth article in this series looks at exactly this.

For each group, set a date. A plan without dates drifts, and unit costs keep moving while it does.

Tools other than a percentage

Price is only one lever, and sometimes not the best one.

Notice periods. Give customers enough warning to plan. Check what your existing terms say about price changes, and take professional advice if they are unclear; this article is a general approach and not legal guidance.

Indexation and formulas. For large or long-running accounts, tying a price to a published index or a cost component (energy surcharges are one example) replaces repeated negotiation with a rule both sides can see.

Terms instead of price. Raising the minimum order value, setting a delivery threshold, or shortening payment terms can recover margin without changing the headline price that customers compare against competitors.

Range and pack changes. For long-tail products that cost more to handle than they earn, a price rise may be the right answer, or withdrawal may be. The second article in the series covers how to tell the difference.

Talking to the customer

Customers accept increases they can understand. Keep the conversation factual: what has changed in your costs, what you have already absorbed, what you are changing and from when. Avoid blaming and avoid apologising for a price that reflects real cost.

Offer something in return where it costs you little: a longer fixed-price window on a committed volume, or a better delivery slot for consolidated orders. A customer who gets a choice between two reasonable options tends to engage with the decision instead of resisting it.

Expect some to push back or test alternatives. Know your floor for each account before the call, which is the margin below which the business is worth less to you than the volume it brings.

What to check this month

• Calculate your realised cost increase from supplier invoices, weighted by spend, and compare it with the 3.1% CPI and 6.1% input PPI figures above.
• Export twelve months of sales and rank customers by margin after the cost of serving them.
• Sort accounts into groups A, B and C, and write one action and one date against each.
• Check the notice and price-change wording in your current terms, and take advice where it is unclear.
• Note the next data points: the ONS releases on 21 October and the Bank of England decision on 5 November, and set a date to revisit the plan after both.

How this fits the series

Read the series in this order: why your average margin lies shows how to find real margin by customer; the long-tail products that quietly cost you money covers the product side; this article turns both into a pricing plan; cost-to-serve: small orders and delivery terms that eat margin deals with the terms behind Group C; and what a Business Health Check looks at closes the series.

If you would rather see this done on your own numbers, the Business Health Check is where to start.