Two in five UK businesses are cutting costs to deal with shrinkflation and rising costs, Zoho Study reveals

☐    18% of respondents cited high inflation as worrying them most when it comes to their business about factors beyond their control last year

☐    56% are seeing rising costs in different areas of their businesses

☐    27 per cent cut AI spend in 2024

Two in five (41 per cent) of UK businesses have reported they are cutting costs to deal with shrinkflation – getting fewer services and functionality for the same or more cost – in order to maintain the same level of quality in what they offer to customers, according to respondents in a recent ZohoDigital Health Study*.

It comes as businesses attempt to recover from economic turbulence caused by factors including rising costs, rampant inflation, and supply chain disruptions.

More positively, 85% of UK business respondents are optimistic about business conditions in the next year, which is higher than that of other European respondents at 80%.

The survey revealed that 18% of UK respondents cited high inflation as a top concern beyond their control in 2024, 21% lower than 2023. However, the current rate of inflation is 3.9%, presenting an ongoing challenge for businesses to navigate.

56% of business respondents are seeing rising costs across their business, prompting 34% to take more services in-house, reducing reliance on external vendors.

To fight economic turbulence, AI projects (27%), digital transformation initiatives (25%), and staffing (25%) were stated as areas of cost-cutting in 2024 by UK respondents to the survey.

To deliver further value, improved customer support (53%), flexible payment options (40%), and greater communications and transparency (39%) were listed by UK businesses responding to the survey as areas that were reviewed and improved to better support customers during turbulent economic times in the past year.

Sachin Agrawal, Managing Director, Zoho UK, commented: “The UK economy has faced significant challenges in recent years, so quite rightly, many business leaders are focusing on future-proofing their operations amid an ongoing permacrisis which continues to cause disruption.”

“To create the best chance of success, businesses must closely examine their digital transformation efforts to ensure they have the tools to weather any storm. It is encouraging to see a shift in priorities toward technology as businesses strive for greater resilience. This forms part of a wider drive to deliver greater customer value in attraction and retention strategies. Businesses should continue to develop long-term customer partnerships offering increased value, especially during periods of economic uncertainty.”

“By adopting the right digital tools, supported by a strong leadership style, a customer-focused culture, and an engaged workforce, businesses can boost flexibility, adaptability, and agility for long-term success.”

Despite turbulence throughout 2024, 81 per cent of UK business respondents claimed they felt prepared to navigate the economic challenges in 2025.

Methodology & notes

For this study, large businesses are classified as having 1000+ employees, medium businesses 250-999 employees and small businesses 25-249 employees.

Censuswide surveyed 1,503 senior digital transformation decision makers in firms with 25+ employees across the UK, France, Germany, Spain, and the Netherlands between 31.10.2024 – 12.11.2024. The UK sample comprises 302 senior digital transformation decision makers, evenly split across all three business sizes.

Disclaimer: All trademarks, product names, and company names cited herein are the property of their respective owners.

For more information, please visit www.zoho.com.

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