The first quarter of 2025 saw a brief respite for UK businesses. According to recent joint research by ACCA (Association of Chartered Certified Accountants) and IMA (Institute of Management Accountants), confidence among UK SMEs showed a slight uptick in Q1 2025.
While the improvement is hopefully a step in the right direction, confidence remains historically low, and the underlying challenges threatening stability are far from resolved.
Why the uptick – and will it last?
Following this year’s Spring Statement, ACCA conducted a survey which revealed that while initial reactions were largely negative, accountants and the businesses they work with are starting to adapt to ongoing pressures. Accountants will be using this period to advise businesses on their current trajectory and reassessing current operations and, for those in the right circumstances, seek to explore new opportunities and/or markets.
However, it’s unclear whether this cautious momentum will continue into Q2. Confidence remains fragile:
- 74% of respondents reported a negative economic outlook
- Only 3% feel optimistic
Economic uncertainty remains the top concern, with 31% citing it as a key issue. Still, in these challenging times, a number of businesses are finding ways to adapt and move forward.
While you can argue businesses don’t have much influence over the economic outlook – global or national they still have their destiny in their own hands over many issues. Our respondents cited (in descending order) managing costs, the regulatory burden, skills/labour shortage, cashflow, level of debt, poor management or poor growth plan and access to finance. All of these can be tackled by entrepreneurs and their advisers and if dealt with well, could dramatically shift the dial in the prospects of any business.
I’d encourage every business to take a long hard look at their strengths and weaknesses and assess their pain points. Then create a plan to make the business as resilient as possible to outside knocks – whether that is reducing costs or tightening the grip on cashflow or refreshing the sales approach. That way they can be ready to increase competitiveness, grow and enjoy greater profitability. Yes, it’s not an easy task – running a business never is – but with an entrepreneurial spirit and crucially being prepared to listen to experienced financial and professional advisers it can be done. I hear from our members how businesses across every sector they work in or advise are thriving even in the face of adversity.
Tariffs and global disruption
The recent economic waves created by the introduction of new trade tariffs have injected a new dose of uncertainty into an already volatile economic environment. While large multinationals might bear the brunt of these measures, especially those with complex supply chains, SMEs are not immune. Changes in tariffs ripple through supply chains, delaying shipments, raising input costs, and affecting pricing competitiveness for those with tight margins.
To weather this storm, businesses should lean into strategies that enhance resilience. This includes diversifying supply chains, exploring alternative markets, and strengthening local sourcing strategies.
Open communication across the supply chain and proactive contingency planning with accountants can also provide some relief. In the face of unpredictable geopolitical and economic developments, flexibility and resilience are no longer luxuries – they’re necessities.
Accountants and SME resilience
Q2 also brings new domestic headwinds for employers with increases to the National Minimum Wage and employer National Insurance contributions and rising costs. From Q4 2024 GECs data we’ve already seen a decline in the employment index, so the start of these changes could see further freezing or a reduction in the scope of hiring plans and further impacting predicted growth and margins.
Accountants play a pivotal role in helping business owners adjust their financial models, manage cash flow, and identify cost-saving opportunities without compromising on quality or compliance.
From advising on workforce planning to restructuring financial commitments, accountants act as strategic guides. Their ability to interpret financial data in real time and model future scenarios gives businesses the clarity they need to make informed decisions, especially during periods of regulatory change.
What will it take to truly rebuild confidence?
The rising costs associated with policy changes will likely be reflected in the next set of results from the GECS survey due in July. While some of the pain may be mitigated by planning and support, many SMEs are operating on slim margins, and even small shifts in the cost base can have an impact.
If there’s one thing that could dramatically improve business confidence and reduce uncertainty, it’s clarity and consistency from the government. The current approach to economic strategy is fragmented, short-term, and lacking clarity. Businesses need a stable, long-term policy framework – one that encourages investment, enables planning, and gives companies the confidence to grow.
Accountants can support this shift by helping businesses to understand their current position and assessing their plans for the future, advocating for their clients’ needs, and ensuring businesses are positioned to take advantage of incentives and reliefs.
Perhaps more importantly, they can help SMEs remain agile, providing the financial insight and strategic advice necessary to pivot when required.
Stability through strategy
The UK’s SMEs are slowly regaining their footing, but the path ahead remains uncertain. Confidence is edging upward, but external pressures – from geopolitical tensions, shifting trade policies, and a sluggish UK economy – mean businesses will need all the support they can get. Encouragingly, the role of the accountant is evolving to meet this challenge and is a key partner in that journey.
The government has a role to play, too. By committing to clearer, longer-term economic policies, it can provide the stable environment that SMEs need to thrive. Until then, strategy, foresight, and the right financial advice will be the cornerstones of business survival.
