The financial landscape for UK SMEs in 2025 is increasingly challenging, with rising insolvencies, Brexit aftermath, and economic uncertainties putting pressure on business owners. For directors, building financial resilience is now more important than ever. Proactive decision-making and expert advice can make the difference between survival and growth. Jonathan Cooper, Founder & Director of The Director’s Helpline and The Director’s Choice, offers insights based on his extensive experience supporting over 600 SME directors monthly, helping them navigate financial difficulties and plan for a sustainable future.
A closer look at the business landscape
Recent data reveals that insolvencies have reached some of their highest levels in over a decade, with over 29,000 firms anticipated to fail this year – a year-on year increase of 5%.
Insolvencies are also projected to end 2024 at 43% above the 2016–2019 average. They are anticipated to remain 30% higher than pre-pandemic levels through to 2026, too.
Construction, trade, and hospitality are some of the hardest-hit industries, with circa 5,000 construction and real estate companies expected to become insolvent this year.
There’s no denying that it’s been a difficult period for companies, and these statistics indicate the extent of the toll it’s taking on the business community.
The recent UK Budget also introduced new fiscal policies, such as higher National Insurance rates and adjustments to corporation tax, that further impact SMEs. While these changes may place additional strain on already-tight margins, they highlight the importance of building financial resilience through careful planning.
There’s also the ongoing issue of bad debt. This remains a critical issue for SMEs.
Many small businesses are shouldering the burden of late payments and unfulfilled invoices, which can snowball into significant cash flow problems. According to a recent report, UK SMEs have seen this surge by 127% – seeing many SMEs having to write off almost £40,000 each in unpaid invoices over a 12-month period.
To help combat this, SMEs need to proactively assess their financial health, implementing robust credit control processes and staying on top of debt management.
A preventative approach
For SMEs, prevention, not reaction, is the cornerstone of long-term success in an unpredictable economic climate.
With the current economic outlook and wider geopolitical circumstances influencing the future of UK business, this upward trend in company insolvencies may continue if preventative, rather than reactive, measures aren’t taken by directors.
The truth is that by engaging early with financial consultants, businesses can identify risks, manage debts effectively, and implement strategies to stabilise and strengthen their finances.
The pandemic taught businesses that forward planning and resilience strategies are key in helping maintain business continuity when the going gets tough.
It’s likely that the uncertain economic backdrop will see directors and business owners seeking more advice on the running of their business – being more proactive rather than reactive. It’s important to talk, and talking is a key part of the prevention process when it comes to avoiding testing financial situations.
Directors need to take greater measures to prepare – surrounding themselves with the right support and advice networks to help them plan for different eventualities.
SMEs that wait until financial issues reach crisis levels risk limited options and higher costs for recovery. Whereas, by engaging early with financial support experts, SMEs can gain access to actionable strategies that safeguard operations, such as restructuring debt, accessing grants, or improving operational efficiency.
The difference between the business and the company
Business owners are inherently passionate about what they do – it’s why they made the decision to become an entrepreneur in the first place.
They enjoy delivering value through their product or service, and they excel at running their business – fostering innovation, building relationships, and driving growth. However, it’s important to understand that a business and a company are two very different things that shouldn’t be used interchangeably.
In basic terms, the business is the craft or service being offered, while the company is the legal entity that ‘houses’ a business.
Running a company presents a different set of challenges. It requires a strategic approach to legal, financial, and operational governance that ensures long-term sustainability. These responsibilities, often outside the comfort zone of many business owners, and that’s okay.
The key to success is recognising that no one can do it all and building a strong support network of trusted advisors that can support with navigating risks, managing debts, and maintaining financial health.
To truly bridge this gap, business owners not placing the entire burden on themselves.
With access to the right guidance, owners can focus on what they love the most – their business – while ensuring their company remains resilient against economic pressures.
A robust support network will transform financial resilience from an overwhelming solo responsibility into a collaborative effort. Business owners will feel empowered to make the best, informed decisions that help them navigate challenges proactively and confidently.
By focusing on cash flow management, tackling bad debt head-on, and leaning into expert guidance, UK SMEs can position themselves to weather the challenges of 2025, ensuring not just survival but sustainable growth in the long term.
