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UK’s small businesses strike upbeat tone for 2025 growth

by December 10, 2024
December 10, 2024
UK’s small businesses strike upbeat tone for 2025 growth

Most of Britain’s small and medium-sized enterprises (SMEs) are looking ahead to 2025 with confidence, despite lingering economic uncertainties, recent budgetary pressures, and global geopolitical concerns.

New survey data from KPMG and Aviva show an optimistic picture emerging among the nation’s business owners, who expect increased demand, international expansion, and a focus on new products and services to support their growth aspirations.

KPMG’s poll of 1,500 privately owned companies from sectors including technology, finance, manufacturing, and retail revealed that 92 per cent of respondents are upbeat about the year ahead. This sentiment was echoed by a separate Aviva survey of about 500 smaller businesses, in which 89 per cent were confident going into 2025.

KPMG noted that much of the optimism centres on expectations of rising demand at home and abroad. Many companies also plan to launch new offerings and move into fresh markets, particularly in Europe and North America. Longer-term, the outlook is equally encouraging, with 85 per cent of Aviva’s respondents anticipating doing more business in five years than they do today.

“2024 has been turbulent, so it’s encouraging to see private businesses showing resilience and casting a positive outlook for 2025 and beyond,” said Euan West, head of KPMG’s private enterprise practice in the UK and Europe. However, he cautioned that next year would still bring its challenges.

A key concern is cost pressures: just over a third of companies in KPMG’s survey believe that the increases to national insurance contributions and the national minimum wage announced by Chancellor Rachel Reeves in the October budget will squeeze their profit margins. Yet rather than scaling back, most SMEs plan to invest more in technology—especially artificial intelligence—to enhance operational efficiency and counter rising costs.

The surveys indicate that these businesses will not only focus on tech-enabled productivity gains; they are also committed to bolstering their workforces. While some critics feared hiring might slow in response to higher employment costs, many SMEs plan to invest in skills and staff development. Yet the talent pool remains a worry: only a third of small businesses strongly agreed there are enough skilled workers available locally. Specific sectors, including manufacturing, hospitality and leisure, and financial services, remain particularly anxious about shortages of skilled staff.

Infrastructure improvements are also high on the wish list. Two thirds of SMEs say they need better local transport options, from electric vehicle charging points to more cycle lanes, to ease employee commutes and support sustainable growth.

David Schofield, sustainability director at Aviva, said: “SMEs are the backbone of the UK economy. Their growth is vital not only for economic stability but also for the prosperity of local communities. These survey findings underscore their determination and optimism while also highlighting the challenges that could impact their growth.”

Despite the headwinds, British SMEs are not standing still. Their plans for internationalisation, new products, and investments in people and technology suggest that 2025 could be a brighter year, setting a positive trajectory for the UK’s broader economic fortunes.

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UK’s small businesses strike upbeat tone for 2025 growth

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