Quarter of businesses say they won’t recover from pandemic until 2027

Some things are hard to shake. The financial fallout from a global pandemic, it seems, is one of them. Almost five years on from the start of the UK’s COVID-19 lockdown, exclusive data from Startups reveals that a large proportion of SMEs are still on the long road to recovery.

Startups surveyed a representative sample of 531 UK businesses at the end of 2024. The results show that 26% of business leaders think it will take them two years or more to recover from the economic and political challenges of the past five years.

It’s been a relentless half decade for small businesses, with the pandemic spilling into a global economic downturn and energy bill crisis. Now, the data suggests that hopes for a swift recovery in 2025 may be premature.

What’s been the toll of the past five years?

Economic and political challenges of the past five years have hit businesses indiscriminately leaving just 8% of companies unaffected. But these issues haven’t faded away in 2025.

High interest rates are prolonging the financial hurdles. Loan repayments continue to burden SMEs, many of which have gone into debt in order to stay afloat in the past few years. Some are still paying back Bounce Back Loans, a government-run scheme established in 2020.

Startups also asked companies whether they were thriving or surviving, in order to gauge how they had responded to navigate their money troubles. Of the surviving businesses:

• 58% had been forced to make workforce layoffs
• 56% had suspended employee benefits
• 54% had suspended employee pay rises
• 51% had shifted to a remote workforce
• 50% had secured another loan

Zohra Huda, Editor of Startups.co.uk, comments: “Our statistics speak for themselves. It’s been a brutal onslaught for the backbone of the British economy, our small businesses. In spite of the hope brought by a new government in 2024, focus has had to switch from growing to just getting by, with the impact being felt by employers and employees alike.”

As some sectors thrive, others falter

According to the Startups data, 22% of firms reported they have already recovered. How long a company takes to bounce back appears to be sector-dependent, rather than a reflection of strong or weak leadership.

The Startups research shows that construction (59%) and consulting firms (52%) were the most likely to say they had already recovered or were not impacted by the last five years.

Last August, growth in the UK construction sector hit its highest level in more than two years after the government’s planning law reforms helped to boost confidence.

At the other end of the spectrum are pubs, bars, and restaurants. Staff shortages and poor trading conditions have made hospitality the least optimistic sector for 2025. 11% of business owners in this field said they anticipate recovery will take more than two years.

Creative arts businesses were the most likely to say they will never recover financially from the past five years. 11% of businesses in this sector expect to fail completely.

Such pessimism may be the result of a steady drain on external financing for the sector. According to Stop Arts Cuts, arts funding fell by 28% in real terms between 2017 and 2022.

SMEs find reasons for optimism

Despite the mountainous terrain ahead, the vast majority of SMEs we surveyed reported high levels of optimism for the future. 82% of small businesses expressed positive sentiments about the next 12 months, compared to just 3% that were not optimistic.

This represents an increase of 23% from 2023, when six in ten companies said they felt positively about their business growth for the year ahead. Most encouragingly, 27% of businesses surveyed in 2024 said they felt highly optimistic about the future.

The increasingly positive sentiments expressed by businesses in our data year-on-year suggests that, while the road to recovery is long, the end is coming into sight for more firms.

While a quarter of business leaders might expect to be in the red until 2027, 44% of businesses told us they expect to fully recover by the end of this year.