I’ve heard from countless SMEs — here’s how they’re reacting to today’s economy

It’s no secret that the past year has tried and tested the resilience of SMEs. From rising costs to funding challenges, the landscape has shifted — and continues to shift — at a staggering pace.  

At Vistage, a CEO mentorship programme, our latest confidence index results indicate that 53% of leaders report a decline in overall economic conditions. But it’s not all doom and gloom.  

In fact, many SME leaders who I speak to are taking this time to adapt their processes, instead of retreating. By doubling down on their priorities and investing in smarter ways of working, they are finding effective solutions to maintain solid foundations in the UK.  

Scaling down to scale-up

We’ve seen a noticeable drop in startup funding and less direct support for SMEs in the recent Spring Statement. It’s easy to feel discouraged. But what stands out to me is how many business owners are refusing to wait around for conditions to improve.  

SMEs are looking to AI to help streamline their operations and improve efficiency. Based on our confidence index, 70% of CEOs and 65% of leaders are already using AI in some form, whether it’s to automate routine admin, improve customer interactions, or enhance production lines. 

If we see emerging technologies implemented effectively, the burden of bureaucracy on SMEs could be significantly reduced, and help businesses manage rising wage costs (a growing concern as inflation continues to affect operational expenses).

I would encourage SME leaders to put their focus on one process at a time to help streamline operations each quarter and start exploring generative AI to help with daily admin. 

By breaking the introduction of AI into manageable phases, SMEs can ensure each process is properly tested, positively adopted by employees, and refined as needed. This reduces the risk of overwhelming the organisation and increases the likelihood of long-term efficiency gains. 

Investing in your people (the smart way)

Even as some companies are cutting budgets, others are continuing to recruit. According to our index, around 31% plan to hire employees in 2025; a clear sign of investment in their future. 

However, with skills shortages still a big challenge in tech, manufacturing, and logistics, it’s not just about hiring right. It’s about making sure your current team is committed to the company. Internal training, mentorship, and even peer support networks like Vistage make a big difference. 

The conversation that never gets old is whether we should work from the office five days a week. Interestingly, 34% of leaders are also encouraging a full return to the office. Many see this as a way to strengthen company culture, improve collaboration, and raise productivity; the crucial focus areas for businesses at different stages of growth. 

It’s also important to note that only one in ten of Gen Z employees prefer to work full-time in the office, according to The Times. Hybrid working is still a big draw card for younger generations and families when choosing a place of work they feel confident committing to. 

It’s important to listen to your employees, as it’s dependent on company culture and industry. I suggest trying to open up dialogue and encouraging feedback across all teams. This could be through anonymous surveys, asking employees their preference when it comes to the new trend of hybrid working, and finding a solution that addresses the majority’s thoughts.  

Staying focused

In terms of global activity, we are seeing international markets capitalising on the UK’s dip in economic confidence, by making themselves more attractive to UK owned companies.

From Ireland’s favourable tax regime to incentives for UK businesses in the UAE and Singapore, global competition for UK-based firms is intensifying. It won’t be a surprise if we see UK businesses consider alternative options.  

Building relationships with international partners is never a bad idea, but uprooting existing UK-based companies is a completely different thing, and a massive adjustment requiring a multiyear strategy.  

Moving, and bringing the team with you

Even with rising costs and attractive international opportunities, a strong percentage (56%) of SMEs feel positive, with CEOs believing their revenue will grow in the next 12 months.  

When it comes to looking at the years ahead, I suggest focusing on understanding what your company needs to thrive. What works for some, might not work for others. 

It’s important to note, though, that implementing new processes and shifting strategies is always easier when employees feel as though their opinion is valued. 

It’s clear that UK SMEs aren’t just standing still. They’re actively positioning themselves not  just to withstand future challenges, but to lead the next wave of business growth. 

For more tips on how to fortify your business for the year ahead, check out the Startups Workforce Report.

By Rebecca Drew, Managing Director of Vistage UK & Ireland

With expertise in scaling businesses and improving sales effectiveness, Rebecca has delivered impactful results at renowned organisations such as Chief and LinkedIn. Now at Vistage, Rebecca supports CEOs and executives in making better decisions that positively impact their businesses, teams, and communities.

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