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 USA in 2024. At the same time, the ongoing dispute with China continues to disrupt supply chains, driving up costs for British businesses.

For them, these developments mean rising costs, disrupted supply chains, and increased financial uncertainty. In this volatile environment, working capital management plays a crucial role. Companies that optimize their working capital – by ensuring liquidity and managing payment terms – can better absorb financial shocks and maintain stability. Without a proactive approach, businesses risk cash flow shortages, higher borrowing costs, and operational constraints. As trade disputes continue, effective working capital strategies will be key to navigating uncertainty and safeguarding financial resilience.

 

Direct Impact on British Companies

The recent escalation in global trade tensions has significant implications for British businesses, particularly in the automotive and steel industries.​

In the automotive sector, the US's 25% tariff on imported vehicles poses a direct threat to UK manufacturers. In 2024, the UK exported approximately 100,000 vehicles worth £7.6 billion 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, likely leading to reduced demand and revenue. ​

The steel industry is similarly affected. The US has imposed a 25% tariff on steel imports, impacting UK steel producers. British Steel, for instance, plans 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. ​

 

Consequences for Working Capital

These developments are not just macroeconomic challenges. They directly impact the cash flow and liquidity of businesses. For British companies navigating the post-Brexit trade 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.

 

The Hidden Cost of Trade Disruptions

Working capital depends on a delicate balance between payables, receivables, and inventory. Trade disruptions disturb this balance in several ways:

Higher Export Costs: If the UK is faced with new trade tariffs from third countries (e.g. through retaliatory measures by the US or China), British exports could become more expensive and less competitive. Rising export costs delay or increase the cost of selling British products, which has a negative impact on cash flow. Companies must hold more capital for customs duties and inventories to compensate for bottlenecks in the supply chain.

Extended Supply Chain Delays: New trade barriers, customs backlogs, or shifts in global supply chains can increase lead times, forcing businesses to hold more inventory. More stock means more cash is locked in warehouses rather than being used for operational flexibility.

Strained Supplier Relationships: To manage cash flow, companies may attempt to extend payment terms to suppliers. However, this can destabilize 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.

 

Why Strong Working Capital Is Essential in a Volatile Trade Environment

For businesses navigating rising trade barriers, working capital is essential for survival and competitiveness. Companies that actively optimize 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 relationships can change overnight, cash flow is a company’s most valuable asset. Those who proactively manage their working capital will 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.

 

The Role of Corporate Treasurers: Safeguarding Liquidity in Uncertain Times

With rising import costs, shifting trade policies, and unpredictable tariffs, corporate treasurers face the challenge of securing liquidity while maintaining financial flexibility. Payables financing has become a critical tool in this environment, allowing companies to extend payment terms without disrupting supplier relationships or increasing financial risk.

 

Optimizing Payables for Greater Stability

Traditional working capital strategies often focus on negotiating longer payment terms with suppliers. However, in a volatile trade environment, this approach can strain supply chains and lead to financial instability among key suppliers. A more effective solution is payables financing, which enables companies to optimize payment terms while ensuring suppliers receive early payments through external liquidity sources.

Key advantages of this approach include:

- Preserving cash flow by extending payment terms without negatively impacting suppliers.

- Reducing reliance on debt-based financing, as liquidity is generated within the supply chain.

- Ensuring supplier stability, which is crucial in times of trade disruptions and economic uncertainty.

 

A Smarter Alternative to Traditional Supply Chain Finance

Unlike conventional SCF models, which require supplier onboarding, IT integration, and complex agreements, modern payables financing 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.

By leveraging innovative financing mechanisms, corporate treasurers can navigate trade disruptions without jeopardizing supplier relationships or increasing balance sheet liabilities, ensuring financial resilience in an unpredictable global economy.

 

About cflox

cflox is an international payment institution that combines payment transactions with working capital and financing to create unique solutions. With a focus on supply chain finance, cflox offers customers the optimization of payment terms and cash flow without the involvement of suppliers.

In cooperation with numerous established, international financing partners such as Deutsche Bank, Commerzbank, ING and UniCredit as well as over 100 active customer programs, cflox offers tailor-made solutions to strengthen liquidity and efficiency in the supply chain.

cflox GmbH is headquartered in Hamburg and is registered as a payment institution (Payment Services Supervision Act - ZAG) for the provision of payment services in Germany with the Federal Financial Supervisory Authority (BaFin).

For more information visit cfloxpay.com

 

Contact

Leonie Bauer

cflox GmbH

Gaußstraße 190c

22765 Hamburg

l.bauer@cflox.com