SMEs face rising costs and inflation worries, but stay optimistic

Small and medium-sized enterprises (SMEs) in the UK are facing increasing financial pressures as inflation continues to drive up the cost of living and doing business, new research from Shawbrook has revealed.

The study found that nearly 78% of SMEs expressed concerns about inflation and the rising cost of living, a significant increase from 69% in 2024.

This inflationary pressure is coupled with a 76% concern about the rising cost of running a business, while 75% of decision-makers cited economic uncertainty as a primary worry.

Despite inflation decreasing slightly from its peak of 11.1% in October 2022, the high cost of doing business has remained a persistent challenge.

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One of the most pressing issues for SMEs is the cost of borrowing, with more than two-thirds (67%) of businesses concerned about rising interest rates, and 27% expressing significant concern.

Shawbrook’s research highlights that SMEs are also grappling with securing adequate funding, as 56% of businesses cited challenges in accessing the right financial support.

Smaller businesses appear hesitant to take on debt, with only 19% planning to apply for loans or new lines of credit in the coming year. Larger businesses, particularly those with 100 to 249 employees, were more likely to seek funding, with 26% planning to apply for loans.

While many SMEs remain cautious about taking on debt, their priorities for the coming year show resilience. Nearly half (47%) of SMEs are focused on managing costs effectively.

Neil Rudge, Shawbrook’s Chief Banking Officer, Commercial, said: “After a difficult few years, the challenges for SMEs are far from over.

Outgoings have increased significantly, and with inflation rising again and additional costs such as the upcoming NIC hike, managing these expenses will remain critical.”

Despite these challenges, Rudge pointed out that there is reason for optimism. “Three-quarters of SME owners are confident about their business prospects.

For those in a position to pursue growth plans, working with a specialist finance partner who understands their business and can offer tailored solutions will be essential to supporting growth during these uncertain times,” he added.