The rising cost of running a business is the biggest worry for UK small firms - and many are questioning the government's support for SMEs, according to a new survey.
Small and medium-sized businesses in the UK are bracing themselves for cost rises this year, according to new research from small business lender Iwoca.
Its annual survey of SME owners shows that mounting business running costs tops the list of pressure points going into 2025, with 42% of business owners citing it as a main concern. The looming threat of higher taxes is also a key worry for 40% of business owners.
Leaders of UK small firms are also unsure about the government's track record so far, it seems. Just 45% of SME owners have a positive impression of the government's performance since last summer; 41% say the government is "failing to deliver on their positive expectations". What's more, 70% of business owners say that politicians don't take the needs of SMEs seriously. A similar proportion (69%) say the government is on the wrong track when it comes to supporting SMEs.
Is the UK falling behind other economies?
Worryingly, just half (51%) of the owners of small and medium-sized firms feel optimistic about the UK's economic future and 66% believe the UK is falling behind other global economies - a rise of two percentage points from last year.
Even so, the findings reveal that 71% of SME leaders expect their own turnover to grow this year, with just 8% expecting it to shrink. In addition, over half (55%) of SMEs plan to expand headcount and 57% expect to be personally better off at the end of this year.
"Business owners need a tax system that incentivises them to take investment risk and reassurance that policies will make inflation stay under control so they can deliver on their ambitions. Business owners have a number of rollercoaster years behind them, finally they are more positive again about their own near-term prospects, but there is a concern that the mixed economic outlook will dampen their success in the future." Christoph Rieche, ceo and co-founder of Iwoca.
Business confidence has "slumped"
Many of the findings echo the results of the latest Quarterly Economic Survey by the British Chambers of Commerce (BCC). Its survey found that:
- 55% of firms expect prices to go up in the next three months, with labour costs the biggest driver.
- 63% of businesses say tax, including National Insurance, is a concern - the highest level since 2017.
- 49% of small firms expect their turnover to increase over the next 12 months (compared with 56% in Q3 2024).
- 55% expect to raise their prices in the next three months, while 43% of businesses expect prices to stay the same.
- Confidence levels are lowest in the retail and hospitality sectors (39% and 42% respectively).
The BCC survey was conducted after the Budget, using data from over 4,800 businesses across the UK (91% of whom are SMEs).
"The worrying reverberations of the Budget are clear to see in our survey data. Business confidence has slumped in a pressure cooker of rising costs and taxes. Firms of all shapes and sizes are telling us the National Insurance hike is particularly damaging. Businesses are already cutting back on investment and say they will have to put up prices in the coming months. Without urgent government action to ease the pain on businesses, the challenging economic landscape will get worse before it gets better." Shevaun Haviland,BCC director general.
The BCC is calling on the government to help in three specific areas:
- Business rate reform to create a system that incentives investment.
- Increased infrastructure investment.
- Support for exports and a better trading deal with the European Union.
Written by Rachel Miller.