Amid the global tariff tensions and uncertainty in the financial market, Airwallex, a leading global payments and financial platform, has analysed the UK small and medium enterprises (SME) landscape, revealing what it’s like to run a small business in the UK in 2025.
The analysis reveals that despite economic uncertainties, 90% of UK SMEs reported growth in 2024 and an impressive 88% of them are optimistic about year-on-year performance in 2025.
The UK SME business landscape
As of January 2024, there were 5.5 million registered businesses in the UK, collectively generating £5.2 trillion in revenue, with SMEs contributing £2.8 trillion of that total. Looking back to 2004, there were 3.89 million SMEs operating across the UK. Twenty years later, that number has grown by 40%, reaching 5.45 million in 2024. The biggest surge in new businesses came in 2016, when over 14% of active companies were newly established.
Business dynamics and growth
For SMEs launched in 2018, 39.4% remain in operation today - a testament to a mix of smart planning, timely decisions, adaptability, and strong leadership.
Despite the challenges, most UK SMEs had a successful 2024, with the average business reporting growth of 27%. Looking ahead, nearly nine in ten SMEs (88%) are optimistic about their performance in 2025. Furthermore, one in four SMEs plans to hire in 2025. In fact, for every SME reducing its workforce, 2.5 are planning to expand theirs.
SME workforce and skills
Confidence around staff retention has grown significantly among SMEs. Only 27% are now concerned about retaining staff - a sharp 32.5% drop from last year. Workforce development is also a clear priority, with 70% of UK SMEs planning to upskill their employees this year. Concerns about the quality of new hires have eased as well, down 35% compared to 2023.
However, diversity in leadership remains an area for improvement. The proportion of female-led SMEs with employees dropped from 18% in 2022 to 15% in 2023, while the share of female sole proprietors held steady at 18%. Representation among minority ethnic groups is also limited, with just 7% of SME employers identifying as non-white.
SME challenges and concerns
Among the many challenges SMEs face, cash flow tops the list for over one in five businesses (22%). Compounding this concern, 41% of SMEs report having less than six months’ worth of working capital in their emergency reserves.
SME investment and innovation
Sustainability in business has evolved. Once focused solely on financial performance, it now carries a much greener meaning. In 2025, 44% of business leaders plan to invest in sustainability initiatives, while a further 53% are exploring alternative energy sources amid rising costs and ongoing political uncertainty.
Artificial intelligence is also a key part of growth strategy. Interest in AI remains high across the SME community, with 89% of leaders viewing it as a growth opportunity. Already, 45% of SMEs have integrated AI into their workflows, and 42% have appointed a senior leader specifically responsible for AI strategy.
AI in UK SMEs
Only 7% of small business owners believe it could pose a threat to their company. The most cited concerns include increased competition, cybersecurity risks, and potential damage to reputation.
When it comes to protecting their assets, just 21% of SMEs have a registered trademark. One striking statistic: 87% of startups don’t use any form of intellectual property protection, with cost being the primary barrier.
SME distribution among regions
The vast majority of the UK’s SMEs (87%) in England, with Wales, Scotland, and Northern Ireland accounting for 4%, 6.5%, and 2.4%, respectively.
London remains a major hub for small business activity, hosting 21% of England’s SMEs - more than one in five. The South-East follows closely with 19%, while the South-West comes in third with 11%.
When it comes to industry, SMEs are most concentrated in construction, professional and technical services, and wholesale and retail - the latter of which generated over 30% of total SME turnover in 2024.
International expansion
UK SMEs are increasingly eyeing international markets, with 28% planning to expand globally within the next two years. Among those with global ambitions, North America tops the list, targeted by 56% of SMEs, followed by Australia (21%), Germany (20%), and the UAE (16%).
The interest is mutual, as 47% of American businesses consider the UK as their top trade partner, reinforcing the strong transatlantic connection.
Currently, 8% of UK SMEs are already trading internationally, while more than a third are actively considering overseas expansion. Support is key to unlocking global growth. Over two-fifths of aspiring exporters say they need help understanding the export process, 37% want better insights into their target markets, and 34% would benefit from financial support to make international trade a reality.
You can read the full report on the Airwallex website.
Copyright 2025. Article made possible by Ready10 for Airwallex.