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UK SMEs brace for average revenue loss of £138,000 in 2025 amid Labour’s budget measures

by November 23, 2024
November 23, 2024
UK SMEs brace for average revenue loss of £138,000 in 2025 amid Labour’s budget measures

SMEs across the UK are preparing for significant financial challenges in 2025, with new research indicating an expected average revenue loss of £138,000 per business.

According to a study conducted by freelancer platform Fiverr, a quarter of businesses anticipate losses exceeding £100,000 due to the financial pressures stemming from Labour’s Autumn Budget.

Despite a modest interest rate cut by the Bank of England, Labour’s proposed £40 billion tax hike—half of which will directly impact businesses—has intensified concerns among SMEs as they look ahead to the coming year. Key issues troubling business leaders include inflation and rising costs (50%), economic instability within the UK (45%), and the broader implications of Labour’s tax policies (37%).

Revenue Challenges and Workforce Reductions

The recent Budget announcement has sparked widespread apprehension among UK businesses, with over half (54%) citing the current political climate as a primary driver of operational instability. An overwhelming 83% believe that proposed changes to Labour’s budget policies and the increase in the national minimum wage will negatively affect their revenue.

Alarmingly, 76% of business leaders foresee Labour’s tax policies adversely impacting workers’ pay, while 60% are considering headcount reductions and hiring freezes over the next year. These anticipated workforce adjustments reflect the mounting financial strain on SMEs amid the new fiscal measures.

Mixed Feelings on Workplace Trends

Despite these challenges, some optimism persists among business leaders. The data reveals that 62% believe Labour’s focus on improving workers’ rights could have a positive effect on employee mental health, offering a glimmer of hope in an otherwise turbulent outlook.

UK businesses are also open to adopting new workplace trends. Half of the surveyed leaders expressed willingness to trial a four-day work week, though 24% doubt its success under Labour’s governance. Additionally, 61% support a return-to-office (RTO) model of at least three days per week, citing improved productivity (61%), enhanced collaboration (40%), and better professional development opportunities (38%) as key benefits.

However, leaders also recognize potential downsides to mandating office attendance. Half believe that enforcing RTO policies could harm employee retention, and 26% fear it may create friction and lower workplace morale. Nearly a quarter are concerned about the impact on employees’ work-life balance and the possibility of increased operational costs associated with the shift.

Focus on AI and Tech Roles in Hiring Plans

Despite economic pressures, over half (55%) of UK businesses plan to expand their workforce in 2025, while 33% intend to maintain current staff levels. Hiring priorities indicate a surge in digital innovation, with nearly half (48%) focusing on IT and tech roles, and 24% targeting positions specific to artificial intelligence (AI).

Fiverr’s 2024 UK Future Workforce Index reveals that businesses are willing to offer an average of 45% higher wages to candidates with AI expertise, with over 80% of leaders prepared to pay a premium for these skills. In contrast, demand for creative and design roles remains subdued, with only 19% of businesses planning hires in this area.

Advancements in AI are influencing hiring decisions, with 43% of businesses citing this as a reason to scale back recruitment. Regulatory changes (34%) and budget constraints driven by the ongoing cost of living crisis (33%) are also significant factors.

Freelancers Key to Bridging Skills Gaps

Freelancers are emerging as critical contributors to the workforce, with 55% of businesses already integrating freelancers into their teams. Nearly a third (32%) are leveraging freelance expertise in AI. Looking ahead, half of UK business leaders view freelancers as essential to achieving their goals in 2025, and 45% plan to increase their reliance on freelancers in the coming year.

Hila Harel, Director of International Growth at Fiverr, commented: “As the UK navigates upcoming challenges, it’s encouraging to see business leaders increasingly turning to freelancers to help tackle economic instability and evolving workplace trends. With the four-day work week and return-to-office policies gaining momentum, it’s clear that workplace flexibility is a top priority. As 2025 approaches, we look forward to seeing freelancers play a greater role in supporting businesses—not just in weathering uncertainty, but also in driving growth and innovation amid ongoing challenges.”

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UK SMEs brace for average revenue loss of £138,000 in 2025 amid Labour’s budget measures

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