The global financial technology firm SumUp has published new findings uncovering some of the challenges small businesses are facing as they reveal their top priorities for the next 12 months, compared to last year.
Speaking to 750 UK business owners, SumUp explores how they are navigating an unpredictable environment which can be massively impacted by sudden changes like supply chain disruptions, shifting consumer demands, and fluctuating inflation levels.
With almost half (43 per cent) of business owners reporting a stronger business performance this year, compared to last, including growth across key areas, we asked how confident they feel about the year ahead. Overall, small business owners remain broadly confident about the year ahead, despite a slight dip in optimism compared to 2024.
A fifth of respondents described themselves as very confident about the next 12 months, expecting their business to experience strong growth and success. This figure is a slight decline from 24 per cent in 2024.
A further third (32 per cent) said they feel somewhat confident, identifying opportunities for growth, while recognising potential challenges. This also reflects a four per cent year-on-year decline in optimism.
Despite a dip in optimism, small business owners concerns have eased overall. Just five per cent of respondents said they are somewhat concerned about their business, anticipating potential challenges, which is down from 10 per cent in 2024. Those who said they are not confident at all have also fallen sharply, from nine per cent in 2024 to only three per cent in 2025.
Notably, two-in-five (40 per cent) report feeling neutral or uncertain about their business prospects, saying that they expect their business to remain steady with no significant growth or decline or are unable to predict due to continuous changes in consumer demand and market conditions.
Current challenges faced by UK SMEs
Almost one in five (19 per cent) small business owners reported weaker performance compared to last year. When asked about what the current challenges were among business operations, rising costs continue to pose the biggest concern for small businesses across the UK.
Nearly half of respondents (47 per cent) identified the increased cost of raw materials, supplies, and products as the most significant challenge to their business. Additionally, 40 per cent report concern over energy, rent, and utilities, while a further 40 per cent point to wider economic instability, reporting concerns about fluctuations in interest rates and reduced consumer disposable income.
In relation to customers, over a third (36 per cent) reported that customers are spending less, with a noticeable drop in average purchase value and overall spending habits. Customer retention is also becoming more difficult, with a third (33 per cent) of small business owners saying it’s harder to keep customers engaged and loyal.
How SMEs are staying on top of current concerns
Nearly nine in 10 small business owners (88 per cent) have made strategic changes to navigate current challenges and remain resilient.
For over a third (38 per cent), this has involved making cost-saving measures across their supply chains and professional services, including switching to more affordable suppliers, streamlining logistics, or bulk-buying to secure better rates. Similarly, 29 per cent have switched service providers such as energy or broadband companies to cut ongoing costs.
When it comes to pricing strategy, small businesses are taking different approaches. A quarter (25 per cent) have increased prices in order to protect profit margins, while 24 per cent have lowered their prices to help customer retention.
Other adjustments UK SMEs are making include boosting their digital presence through launching a website or posting more frequently on social media (23 per cent), improving customer loyalty programmes to encourage repeat purchasing (16 per cent), and seeking external funding or support to strengthen cash flow (10 per cent).
AI adoption on the rise among UK SMEs
As small businesses look for new ways to drive growth and improve operational efficiency, AI is emerging as a key area of focus. Over half (52 per cent) of UK SMEs say they have either already adopted AI tools or plan to do so in the next 12 months, while a further 18 per cent are interested and may consider adoption after further research.
When asked how they view the role of AI and emerging technologies, the response was largely optimistic. Over a quarter (27 per cent) of business owners and decision makers see AI mostly as an opportunity, highlighting its potential to drive growth or increased efficiency. A further 22 per cent acknowledged both the opportunities and risks associated with the technology.
However, not all SMEs are fully convinced. Almost one in five (19 per cent) say they view AI mostly as a threat, fearing potential for automation and the potential to replace aspects of their business. Meanwhile, nine per cent expect it to have minimal impact in the near future.
Digital transformation remains high on SMEs priorities
Beyond AI adoption, digital transformation is emerging as a focus for many SMEs. Over a third (35 per cent) of small business owners and decision makers believe that embracing innovative technology, improving their digital presence, and staying ahead of digital trends is very important to their long-term success.
Whether through social media or digital payments, businesses are recognising they need to modernise to stay competitive.
A further third (33 per cent) say digital transformation is somewhat important, highlighting a measured approach and that they are taking small steps to improve their technology, although other business priorities take precedence.
Only 14 per cent say technology is not a major priority, showing that the vast majority of SMEs see value in staying ahead of digital trends.
Together with AI adoption trends, this reflects a broader digital shift across the UK’s small business landscape, where innovation is increasingly linked with resilience and growth.
Priorities for growth over the next year
When it comes to growth priorities, UK small businesses are focused on strengthening their financial foundations, whilst exploring new opportunities for expansion.
The top priority for nearly half of respondents (42 per cent) is improving profit margins, reflecting a strong focus on financial resilience amid ongoing cost pressures. Alongside this, a third (34 per cent) are prioritising diversifying their income streams, such as launching an e-commerce site, opening a physical store, or selling through social platforms like TikTok Shop.
Furthermore, cost reduction and debt management remain front of mind for a further third (33 per cent), whilst 19 per cent look to seek funding or investment.
Other priorities for small businesses include launching new products or services (20 per cent), improving operational efficiency (20 per cent), and preparing for economic uncertainty (15 per cent).
Corin Camenisch, product marketing lead at SumUp commented on the survey: “As champions for small merchants, we conducted this survey to discover the confidence levels of small business owners and decision makers in the UK to better understand the challenges they face, gauge their optimism about their future, and identify areas where support for SMEs might be needed.
“Overall, confidence levels of small business owners and decision makers across the UK are high. This positive outlook suggests that small merchants are prepared to navigate potential uncertainties and continue to thrive.
“We have provided tips off the back of our findings for those just starting out in business, or who are looking to deal with unexpected market fluctuations on our full campaign page.”
