A fall in gross margin can lead to a quick request for a price increase. Sometimes that is right. Sometimes it means the business has not yet found the cause.
The ONS reported on 22 October 2026 that 33% of trading businesses had seen prices paid rise in September, against 12% reporting higher selling prices. The survey describes pressures reported across the businesses it covers. It does not tell an individual manufacturer, contractor or service business why its margin has moved.
I would ask the finance team for a margin analysis explaining the movement from the previous period to the current one, starting with the material customers or product groups. A lower average selling price may reflect discounts, but it may also reflect a change in mix. Higher labour cost per unit may come from wage rates, overtime, rework or lower throughput. Those explanations call for different responses.
Take an illustrative business with a fixed-price contract and rising materials costs. It may not have the contractual ability to raise its price immediately. Management might need to renegotiate at renewal, change the specification with agreement or reduce waste. By contrast, where a customer pays for an agreed level of service but repeatedly requires additional work, the scope may need attention more urgently than the rate.
The forecast should then show the practical choices: margin recovered, cash timing, delivery capacity and the risk of losing the customer. I would want one recommended action and one person accountable for testing it.
The purpose of the margin analysis is to help management identify the cause and choose the right response.
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