How will UK SMEs navigate the challenges of 2025?
Thinking about what might be ahead for small businesses in 2025, I’m reminded of the words of American author John A. Shedd: “A ship is safe in the harbour, but that’s not what ships are built for.”
UK SMEs have shown time and again that they are not only able to withstand uncertainty, but thrive in it. And entrepreneurs are especially skilled at turning challenges into opportunities. So, with that in mind, what can UK SMEs expect from 2025?
Navigating economic headwinds in 2025
Towards the end of last year, through our Business Barometer, we asked SMEs about their expectations for 2025. While the economic landscape might require navigation, investors and business leaders recognise that the fundamentals for growth are there but need to be unlocked. Seven in ten UK businesses expect to see their turnover increase over the next year, a notable rise from 62% in December 2023. And this optimism extends to profitability too, with nearly three-quarters of businesses of the view they will achieve greater profitability over the year ahead.
In addition to financial growth, more than a quarter of SMEs plan to invest in training, recognising the importance of developing their workforce. Similarly, 24% of businesses are planning pay rises for their teams, reflecting a commitment to rewarding and retaining talent. And over a fifth of SMEs are looking to enhance their technology through automation or artificial intelligence (AI).
All of this points towards a sense of cautious optimism. While the UK still faces into economic headwinds, this can stimulate innovation and strategic thinking among business owners.
By finding innovative ways to attract and retain customers, such as diversifying product lines, enhancing customer propositions, and leveraging digital marketing strategies, businesses can thrive in an environment which could be perceived as challenging.
Harnessing the power of artificial Intelligence
The rapid pace of technological change presents huge opportunities for businesses. AI and other advanced technologies can revolutionise operations, leading to enhanced efficiency and new revenue streams.
While the cost and complexity of implementing new technologies can be daunting, partnering with technology providers or consultants can help SMEs make informed decisions and maximize the benefits of their investments. Staying abreast of technological trends and investing in the right tools will be crucial for remaining competitive.
AI can automate routine tasks, freeing up time for business owners to focus on strategic planning and customer engagement. For example, AI-powered chatbots can handle customer inquiries, providing quick and efficient service. AI can also analyse customer data to identify trends and preferences, enabling businesses to tailor their offerings and marketing strategies more effectively.
Embracing digital tools and technologies will be crucial for enhanced efficiency and opening new revenue streams. The cost and complexity of implementing new technologies can be daunting for small business owners though. SMEs should consider partnering with technology providers or consultants to ensure they are making informed decisions and maximizing the benefits of their investments.
Furthermore, technology can facilitate remote or hybrid work and flexible working models. This adaptability can attract a diverse talent pool and reduce overhead costs associated with maintaining physical office spaces for all activity. By leveraging technology, small businesses can operate more efficiently and reach a global audience, expanding their market potential.
Support networks, such as local business associations and government initiatives, can provide valuable resources and guidance too. These networks can offer training programs, financial assistance, and mentorship opportunities, helping small businesses overcome obstacles and seize new opportunities.
Navigating geopolitical change
Global geopolitical change can have a ripple effect on small businesses in the UK. Staying informed about global developments – for example changes in tariff policies, and being prepared to adapt is prudent. For example, small businesses may explore broadening their range of suppliers through importing and the markets they sell into through exporting. It’s this diversification that can enhance resilience and potentially open up new revenue streams and our International Trade Portal is a great place to start in identifying opportunities.
What’s Next?
The resilience and adaptability of SMEs will, as always, be key to their success in the year ahead. By staying informed, adapting to changes, and investing in their people and technologies, small businesses can navigate challenges and capitalise on growth opportunities.
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