Running a small business in the UK is no easy task, however, the lingering effects of the recent recession are now starting to shrink and 2024 is seeing inflation drop to its lowest level in two years1.

With this in mind, SumUp surveyed 750* small UK business owners and decision makers within small UK businesses to see how confident they feel about the state of the current UK market, the challenges they are facing, and if their current confidence levels extend to future expectations.

Confidence levels among London SMEs:

Overall, small business owners and decision makers in London are optimistic about their business over the next 12 months, especially as the UK economy shows signs of recovery following the technical recession it entered in 2023. While two in five (40%) of respondents said that they are confident and expect to overcome challenges, a further 28% said that they are very confident and anticipate significant growth over the next 12 months.

One in six (15%) felt neutral on the topic, neither expecting their business to grow or decline significantly, whilst 9% acknowledged that they were facing challenges however, felt positive about their future.

Only 7% of respondents said that they are worried about their business over the next 12 months, expecting to face a lot of challenges.

Current challenges SMEs are facing:

It appears that there are several challenges that London-based SMEs are facing. Over two-fifths (43%) of respondents said that the cost of bills and necessary investments such as rent, gas, and new machinery is the biggest challenge impacting business confidence. Similarly, 42% said that the current economy and inflation rates is a cause for concern, despite the UK economy showing signs of recovery.

Additionally, almost a quarter (24%) of small business owners and decision makers said that it is getting tougher to stay on top of competition, with 22% saying that their competitors are offering cheaper alternatives.

Other challenges that are impacting SME confidence levels include finding and retaining employees (18%), customer retention (17%), and smaller profit margins (13.5%).

How SMEs are tackling challenges:

London based SMEs are making a number of changes to their business in an attempt to overcome challenges, with cost-saving plans at the top of their list. Almost a third (32%) of respondents have made cost-saving plans regarding various aspects of their business, including a change of service providers or supply chain and professional services.

Small business owners and decision makers have also expanded their product or service offering, with 26% hoping this will allow their business to expand into new markets and reach new consumer groups. Additionally, 25% of SMEs have invested in digital transformation in a bid to support business growth, whether that’s introducing online booking systems, offering digital payment options, or implementing CRM systems.

Other steps that respondents are taking include lowering prices in order to help customer retention (24%), increasing prices to protect profit margins (12%), and reworked their business so it is more eco-friendly, resulting in lower energy costs.

Only 6.5% of respondents said that they have made no changes to their business.

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.”