Running a small business takes courage, adaptability, and initiative. But there’s only so far that can get you – financial capital is the bottom line. While lulls in profitability throughout the year are expected, it’s clear that for many businesses 2025 has been an uphill struggle.
The latest Budget delivered by Chancellor Rachel Reeves in November set out some clear measures for the UK’s economy, but left many small business owners with mixed emotions. The successive rise of wages and tax increases are driving up costs for SMEs without a clear strategy to support those that won’t survive as a result.
On top of this, the Office for Budget Responsibility (OBR) has downgraded predictions for the UK economy, with growth expected to be just 1.4% in 2026. This means businesses will have even less money for hiring and paying workers as growth is slow.
As this year draws to a close – traditionally a moment of reflection before planning for the next 12 months – many SME owners will be assessing whether they have the capital and risk appetite to keep trading in 2026.
Absorbing costs to keep customers
The operating costs of running a business are becoming unsustainable for many. Energy bills remain high – and the hospitality industry is calling for the Competition and Markets Authority (CMA) to investigate the “competition problems” that are making non-domestic bills so high*.
Meanwhile, wages and hiring costs are reaching new heights for employers, resulting in many businesses cancelling plans to take on staff.
Earlier this year one in five small business owners (18%) said they would be forced out of business within a year if conditions don’t improve, according to Simply Business research**.
Despite this, over half (51%) of owners say they’ve kept prices stable this year – suggesting that they’ve been absorbing extra costs to avoid losing customers. Worryingly, almost one in five (19%) have revealed they’ll need to use personal savings just to remain in business***.
Funding initiatives and financial buffers
Incentivising businesses to offer apprenticeships and giving young people a new route into work is one way the government is trying to address underemployment challenges. An apprentice can offer business owners a more affordable way to hire staff, create a culture of learning, and even plug gaps in their own knowledge.
The 2025 Budget announced funded training for under-25s to complete an apprenticeship with a small business – answering a direct call from the Federation of Small Businesses. High street businesses, from hair salons and barbers to restaurants and cafés, as well as jobs in the trades are just some of the SMEs that could benefit from this new initiative.
Meanwhile the permanently lower business rates for over 750,000 retail, hospitality, and leisure businesses will provide much needed breathing space. But with a revaluation of the rateable values used to determine business rates expected in April, many are worried that they could actually see their bills rise.
Nuanced challenges need listening to
There’s not one silver bullet that can fix the challenges small and medium-sized businesses are facing right now. We know that issues are nuanced and, for many founders, it’s a case of making hard decisions to stay afloat.
I’m proud that Simply Business is offering a range of solutions to support 10,000 small businesses by 2030. Through our Big Dreams Project, we’ll be working with entrepreneurs, young people, and micro businesses to help people from different backgrounds access training, funds, and entrepreneurial skills.
Why? Because our economy relies on small businesses to thrive. The UK is home to 5.64 million small businesses and they sit at the heart of our communities, providing vital employment opportunities, innovative solutions, and key services that we rely on. The time is now to make sure the right strategies are in place to position our SMEs for future success.
* UK Hospitality, 24 March 2025 https://www.ukhospitality.org.uk/cma-investigation-business-energy-market/
**Findings from a survey of 957 small business owners conducted March 2025
***Findings from a survey of 1,465 small business owners conducted October 2025
