One in five UK SMEs struggling as tech & skills gaps grow

A recent report from Employment Hero indicates that one in five small and medium enterprises (SMEs) across the UK are operating in or near survival mode.

The Work That Works report, which surveyed 1,000 business leaders and 1,200 employees nationwide, provides an assessment of workplace productivity and highlights the precarious position of many businesses. According to the findings, the situation is most acute among smaller firms, where 39% of business owners with fewer than 50 employees describe their businesses as surviving rather than thriving.

Regional impacts

The report shows significant variation across different regions of the country. In the Midlands, 38% of businesses are either in or nearing survival mode. Northern England also reports high levels of strain, with 34% of businesses indicating they are on or near the edge. Even in London, where economic opportunities have traditionally been viewed as more favourable, 29% of firms are reporting similar conditions.

The data suggest that the challenges faced by SMEs are not isolated to specific areas, but are more broadly linked to widespread economic uncertainty, rising operational costs, and continued pressure on entrepreneurs and businesses alike.

Workforce and technology hurdles

The report highlights that smaller SMEs are particularly affected by skills shortages and lagging investment in technology. Only 43% of leaders in small SMEs report satisfaction with the technical knowledge within their teams, compared to 51% in mid-sized companies and 64% in organisations with more than 250 employees. The reluctance to invest in technology is also pronounced: small SMEs are reportedly 50% less likely than mid-sized firms to make technology investment a priority for the next year.

A further concern is the downward trend in spending, with 10% of small SMEs saying they are currently investing less in technology than in prior years, potentially exacerbating their long-term operational challenges.

Barriers to growth

"Our research shows just how many small businesses are operating at breaking point. The solution isn't asking them to work harder, it's removing the barriers that stop them working smarter. That means cutting the admin burden, closing the tech gap, and giving teams the clarity and tools they need to focus on what really drives value."

That was the assessment from Kevin Fitzgerald, Managing Director at Employment Hero, in response to the report's findings.

The emphasis on reducing administrative burden and supporting technology adoption is seen by many in the sector as critical to ensuring the long-term sustainability of small businesses. Industry observers note that while hesitancy over new investments may deliver short-term cost savings, it can impede productivity and growth prospects over time.

Survey methodology

The findings are based on a broad sample of businesses with fewer than 1,000 employees, drawn from a representative spread of industries, regions, and company sizes. The survey aimed to reflect the current realities faced by owners and founders across the UK's business landscape.

The report provides real-time insights into the pressures facing SMEs, underscoring the need for policies and industry support tailored to the environment in which many businesses now find themselves.