Running a small business in the UK is no easy task. From supply chain disruption, shifting consumer demand, and fluctuating inflation levels, business owners are navigating an unpredictable environment.

With this in mind, SumUp surveyed 750* UK business owners and decision makers within small UK businesses to see how confident they feel about the state of the current UK market, their top growth priorities for the next 12 months, and how their confidence levels stack up against last year.

When it comes to SMEs in London, what are their confidence levels and outlook for the year ahead?

Confidence levels among London SMEs: 2024 vs 2025

Almost half (49%) of SMEs in London reported a stronger business performance this year, compared to last, including growth across key areas. Following this, we asked how confident they feel about the year ahead.

Despite a slight dip in confidence overall, the outlook remains broadly positive among London’s small business community.

A quarter (25%) of small business owners in London described themselves as very confident about the next 12 months, expecting significant growth and success. While this represents a slight drop from the 28% who felt strongly confident in 2024, overall sentiment remains upbeat.

A further third (32%) of respondents expressed confidence, though with cautious optimism. They acknowledged potential challenges but maintained a positive outlook on growth opportunities. This is a modest decrease from 40% who reported similar confidence levels in 2024.

In total, 57% of London’s small business owners expressed confidence in the year ahead, a decline of 11 percentage points in total from last year.

While only 4% of SMEs in London report feeling somewhat concerned, and just 1% as not confident about the future of their business over the next 12 months, a further 38% expressed neutrality or said they were unsure, expecting their business to remain steady with no significant growth or decline.

Only 4% of respondents said they felt somewhat concerned, with just 1% not confident about the future of their business. Meanwhile, 38% described their outlook as neutral or uncertain, expecting their business to remain steady without significant growth or decline.

Current challenges faced by London SMEs:

While a third (34%) of SMEs report a stable business performance compared to last year, 15% noted a slight decline, though they remain generally stable. A further 2% said their business has experienced a significantly weaker performance. When asked about what the current challenges were among business operations, rising costs pose the biggest concern for small businesses across London.

Almost half (46%) of respondents identified the overall economy as their most significant challenge, including interest rates, inflation, and changes in consumer disposable income. Furthermore, while 44% are challenged by the rising cost of raw materials, including supplies and inventory, a further 40% are finding the cost of bills difficult to manage, including energy, rent, and gas.

In relation to customers, over a third (35%) reported that customers are spending less, with a noticeable drop in average purchase value. Furthermore, 31% noted that customer retention is getting tougher, expressing that it is becoming more difficult to keep customers engaged. A similar proportion (30%) also raised their concern that customers will start buying from competitors for better prices or convenience.

Other concerns for SMEs in London include staying ahead of competition (36%), customers are more price-sensitive than before (28%), and customers making fewer purchases overall (22%).

How SMEs are staying on top of current concerns:

Nine in ten (90%) SMEs in London have made strategic changes in the past six months to navigate current challenges and remain resilient, which have resulted in a positive impact on their business performance.

A number of cost-saving measures have been put in place by SMEs. This has involved changes across their supply chains and professional services, including over a third (38%) of SMEs who have switched to more affordable suppliers, streamlining logistics, or bulk-buying to secure better rates. Similarly, 33% have switched service providers such as energy or broadband companies to cut ongoing costs.

When it comes to pricing strategy, SMEs are taking different approaches in response to current market conditions. Almost a third (30%) report a positive impact on their business performance by raising prices to help improve their profit margins, while 22% have had success in lowering their pricing structure to line up with consumer spending habits.

Other adjustments UK SMEs have made, reporting a positive outcome, include introducing a new product or service (28%), enhancing their digital presence through social media or by opening their own website (27%), or upskilling staff or hiring new talent (25%).

Priorities for growth over the next year.

When it comes to growth priorities, SMEs are focused on strengthening their financial foundations, whilst exploring new opportunities for expansion.

The top priority for 42% of SMEs is to improve their profit margins, whilst a third (34%) aim to reduce business costs and debt. To do this, 35% are focused on diversifying income streams, whether by opening a physical store, expanding into e-commerce, or exploring sales through social media platforms like TikTok. Meanwhile, 19% are aiming to secure funding or investment to support growth.

Other priorities for small businesses include launching new products or services (19%), improving operational efficiency (18%), and preparing for economic uncertainty (14%).

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.”