As inflation, tax changes and tighter market conditions squeeze the UK SME landscape, new research from e-Residency reveals a sector pushing for progress amid economic strain.

While 92% of entrepreneurs and SME owners plan at least one strategic move in 2025 – from AI investment to targeting new customer segments – over six in ten (63%) are unsure their business will survive the year ahead.

The findings reflect a sector full of ambition, yet calling out for support. Beyond financial pressure, founders highlight the need for better access to AI training and industry advice.

With nearly one in five (18%) calling the year ahead “overwhelming,” the data points to a broader support gap, toward systems and policies that help founders adapt, compete, and grow.

Pressures Mount 

Nearly a quarter (24%) of UK entrepreneurs and SME owners say their businesses are not growing with financial pressures likely contributing to their inability to scale. Across the board, respondents highlight a range of immediate challenges shaping today’s business landscape.

Four in ten (42%) cite inflation and rising borrowing costs, while a third (32%) are feeling the heat from increased competition – both domestic and international.

One in three (30%) say they are struggling to meet changes in consumer behaviour and expectations, while the same amount report rising employment costs as a barrier due to changing legislations.

A quarter (24%) are navigating complex compliance requirements, while one in five (20%) highlight global trade uncertainty, UK-US relations and wider geopolitical tensions.

Yet despite these pressures, many are approaching the year ahead with emphasis on expansion, investment and even relocation.

Nearly all (92%) plan at least one major business move in 2025, with three in five (61%), rising to 71% among founders aged 18-34.

Targeting new customer segments is a priority for 44%, while 42% plan to invest in new technology or infrastructure.

A fifth (20%) are considering expanding or relocating outside the UK.

Hiring Plans

Hiring plans across the UK SME landscape are evolving, as founders look to balance ambition with cost control. Three quarters (76%) of respondents say their approach to hiring has changed due to economic conditions – rising to 96% among entrepreneurs aged 18-34.

Still, nearly half (48%) of respondents are still actively hiring, with a fifth saying they’re hiring both strategically – to drive growth – and operationally to support core functions.

Young entrepreneurs are leading the charge, with 69% of 18-34s actively hiring, compared to just 41% of those aged 45-54.

Meanwhile, 29% say they would benefit from bringing in new talent, but have paused hiring or reduced headcount in an effort to manage costs.

Recommended reading

• Scottish Economy Faces Tough Start to 2025
• UK SMEs Show Signs of Recovery While Mid-Market Thrives
• What IT Trends Will Shape UK SMEs in 2025?

Beyond Funding

While access to capital remains important, it’s not the only thing respondents say they need to succeed.

Among the most in-demand areas of support for the next five years include digital tools and platforms to streamline operations (34%), as well as access to industry-specific insights and advice (28%).

A quarter (25%) see AI training as key to improving their operational efficiency, while a fifth (20%) say they would benefit from mentorship from experienced entrepreneurs.

This reflects both need for both technical advancements and better leadership guidance UK SMEs are missing.

This is also reflected in the skills SMEs think will be mores valuable over the next five years.

While nearly half (48%) think digital and tech capabilities will be most valuable,  44% point to financial literacy and strategic budgeting skills, and 42% cite marketing and brand positioning skills were more valuable.

Networking and partnership-building skills were valued by a third (33%), while a fifth (20%) cited crisis management and resilience-building skills.

“We talk a lot about funding, but what many founders lack is access to the right digital tools and support systems,” Lina Vahtras, managing director at e-Residency, said.

“Traditional UK business structures – from training to hiring models – often don’t reflect how people are actually building companies.

“At e-Residency, we’re seeing more UK entrepreneurs turn to digital-first solutions that move as fast as they do. And increasingly, they’re using that freedom to design companies that don’t look or operate like the ones that came before.”