Global trade tensions are escalating, with Donald Trump’s latest tariff proposals reigniting uncertainty. The prospect of a 25% tariff on car imports to the US poses a direct threat to UK manufacturers, who exported vehicles worth several billion pounds to the US in 2024. Meanwhile, the ongoing dispute with China continues to disrupt supply chains, driving up costs for UK businesses
For UK companies, these developments mean rising costs, supply chain disruptions, and increased financial uncertainty. In this volatile environment, working capital management is more than just a financial strategy, it is a crucial factor in business resilience. Companies that optimise their working capital by ensuring liquidity and managing payment terms effectively can better absorb financial shocks and maintain stability. Without a proactive approach, businesses risk cash flow shortages, higher borrowing costs, and operational constraints.
The recent escalation in global trade tensions has significant consequences for British businesses, particularly in the automotive and steel industries.
In the automotive sector, the US's proposed 25% tariff on imported vehicles is a threat to UK manufacturers. In 2024, the UK exported approximately 100,000 vehicles worth £7.6bn to the US. Luxury brands such as Jaguar Land Rover, Bentley and Rolls-Royce, which rely heavily on the American market, face potential price increases of up to $27,000 per vehicle.
This is likely to reduce demand and revenue, putting additional pressure on an industry already facing challenges from moving consumer trends, such as the shift to e-mobility.
The steel industry is similarly affected. The US has imposed a 25% tariff on steel imports, impacting UK steel producers. British Steel, for instance, is set to close its blast furnaces and steelmaking operations in Scunthorpe after unsuccessful negotiations for a rescue package with the UK government, putting approximately 2,700 jobs at risk.
These are two examples of industries that have been hit particularly hard by the tariffs. However, almost all companies that import and export and have global supply chains are likely to be severely affected.
... working capital management is no longer a routine financial exercise but a key determinant of business resilience
These developments are not just macroeconomic challenges. They have a direct impact on corporate liquidity. For British companies navigating the post-Brexit landscape, the financial effects of shifting trade policies are severe – tying up capital, increasing costs, and making access to liquidity more complex.
In this environment, working capital management is no longer a routine financial exercise but a key determinant of business resilience.
Now that the UK is facing new retaliatory measures by the US, British exports could become more expensive and less competitive. Higher export costs delay or increase the cost of selling British products, negatively impacting cash flow. Companies must allocate more capital for customs duties, inventories, and staff to compensate for supply chain bottlenecks.
New trade barriers, customs backlogs or shifts in global supply chains will increase lead times, forcing businesses to hold more inventory. As a result, more cash is locked up in stock rather than being available for operational flexibility.
To manage cash flow, companies may attempt to extend payment terms with suppliers. However, this can destabilise supply chains, leading to production delays or even supplier insolvencies.
Each of these challenges leads to one overarching risk: a liquidity crunch that limits financial agility. Without careful working capital management, companies may find themselves relying on expensive short-term financing, delaying critical investments, or even struggling to meet obligations during periods of uncertainty.
For businesses navigating rising trade barriers, working capital is essential for survival. Companies that actively optimise their cash flow can absorb cost increases without immediate financial strain, ensuring supplier stability and keeping operations running smoothly.
Maintaining liquidity allows businesses to remain flexible and quickly adapt to shifting trade policies, reducing their reliance on expensive external financing and preserving financial health in uncertain times.
In an era where trade dynamics can change overnight, cash flow is a company’s most valuable asset. Those who proactively manage their working capital can not only withstand economic turbulence but emerge stronger, while those who overlook it risk being caught off guard by the next political or financial shift.
Payables financing has become a critical tool in this complex environment, enabling companies to extend payment terms without disrupting supplier relationships or increasing financial risk.
Traditional working capital strategies often focus on negotiating longer payment terms with suppliers. A more effective solution is payables financing, which allows companies to benefit from additional payment terms while ensuring that suppliers are paid on time through external sources of liquidity.
Key advantages of this approach include:
Unlike conventional supply chain finance models, which require supplier onboarding, IT integration, and complex agreements, modern working capital solutions offer immediate scalability and seamless implementation. These solutions work without requiring suppliers to participate, making them a flexible and efficient option for treasurers looking to enhance liquidity amid trade uncertainty.
Importantly, such solutions can also include pre-shipment finance, enabling early financing for more vulnerable suppliers in critical parts of the supply chain – well before goods are delivered. This extends the protective effect of payables financing to the entire production process.
By leveraging innovative financing mechanisms, corporate treasurers can navigate trade disruptions without jeopardising supplier relationships or increasing balance sheet liabilities, ensuring financial resilience in an unpredictable global economy.
Timothy Rose is head of sales UK at cflox
