10 Reasons UK SMEs can be cautiously optimistic about 2026

Let’s face it, all of us who run SMEs or work closely with the sector have had a sucky time for a while. (Yes, that’s a bona fide business term.) Brexit, COVID-19, Russia’s invasion of Ukraine, Truss and two lacklustre Labour Budgets have left many of us reeling and despondent.

Even my boundless positivity took a knock in 2025, so I went looking for hope and found some credible reasons for cautious optimism in the UK SME landscape in 2026 - grounded in data, not wishful thinking. (Well, maybe a bit.)

1. UK SMEs are planning for growth, not retreat

An Aviva survey published in October shows that 73% of UK SMEs expect to grow over the next 12–24 months. Many are planning to expand services, invest in skills or explore new markets — a strong signal of renewed confidence after a difficult period. Nearly half are expecting to take on new staff, which feels like much needed good news for jobseekers.

Workload pressures need to be addressed with over three quarters (77%) of SME leaders taking on tasks outside of their core role more than once a week, including 38% taking on functions such as sales and marketing.

2. Inflation pressures are easing, offering more predictability

UK inflation fell more than expected in November (FT), giving businesses greater visibility and predictability over price trends — a welcome signal for planning and investment. While headline inflation has moderated, research from iwoca highlights that many SMEs haven’t yet felt the benefits: nearly half report that costs remain high (energy costs being a particular pain point) and expect to pass some increases on to customers.

3. Interest rates appear closer to a peak than a climb

Falling interest rates reduce the cost of borrowing and make finance more accessible. According to Forbes, the US Federal Reserve’s decision to lower rates “lower[s] the cost of capital and lift[s] small business,” enabling firms to invest or manage cash flow more affordably. In the UK, the Bank of England’s decision to hold the base rate at its lowest level since early 2023 provides a similarly supportive environment.

4. Productivity is back at the top of the agenda

Many SMEs are shifting their focus from firefighting to strengthening the way they work. A clear purpose, improved leadership skills and streamlined processes are increasingly seen as essential to future resilience and growth.

One practical reflection of this focus is the strong engagement in the government-backed Help to Grow: Management programme. Since its launch, the course has enrolled over 13,000 UK business leaders and seen more than 10,000 completions, equipping SME leaders with structured management training, mentoring and peer learning. Independent evaluations show high levels of satisfaction and business impact: large majorities report improved leadership ability, stronger internal processes and clearer decision-making. Over 90% of participants would recommend the programme to other SME leaders, indicating strong value and relevance. (smallbusinesscharter.org)

5. AI adoption is moving from hype to practical use

UK SMEs are increasingly turning AI from a buzzword into a practical productivity tool — whether for automation, customer insight, process efficiency or decision support. Government analysis shows that even a 1% uplift in digital productivity across UK SMEs could add £94 billion to GDP each year, highlighting the scale of opportunity from digital adoption and AI.

Research also suggests that accelerating AI adoption could unlock up to £198 billion in additional economic value for UK SMEs, with productivity gains equivalent to an extra working day per week. Around 35% of SMEs currently use AI tools, with training and guidance identified as key factors for broader uptake.

6. The UK service economy remains resilient

Many SMEs operate in the UK’s services sector — professional services, health, education, hospitality, and creative industries — which has shown relative resilience compared with manufacturing in recent business surveys and output data. For example, the NatWest SME PMI Business Activity Index has regularly shown that service providers report rebounds in service sector growth and higher business activity even when manufacturing and construction lag, indicating that demand in the service side of the SME economy often performs better.

Official data from the Office for National Statistics (ONS) also show that UK services output grew modestly in mid‑2025, with 10 of 14 service sub‑sectors expanding over a recent three‑month period, led by areas like human health and social work activities and administrative support services. These trends help offset weaker performance in some goods‑producing industries and highlight the ongoing role of services in sustaining overall economic activity.

7. SMEs are diversifying

Many small businesses are deliberately reducing dependency on a single client, product or supplier. Diversification — whether through new services, partnerships or markets — is becoming a core resilience strategy. The Aviva survey indicates that of the 73% of SMEs that anticipate growth over the next year, half plan to diversify their products or services. Click here to read more about what’s on the mind of business leaders as we head into 2026.

8. Leadership expectations are changing for the better

There is growing recognition that sustainable performance comes from healthy leadership cultures. Recent research from the Chartered Management Institute (CMI) highlights that a large proportion of UK managers — including many in SMEs — lack formal management training, and that poor leadership is linked to higher staff turnover and disengagement, underscoring the value of investing in capability building.

Supporting this, leadership research highlighted in the Harvard Business Review shows that organisations that invest in leadership development programmes tend to achieve stronger business outcomes, with leaders who prioritise emotional intelligence, communication and adaptability driving higher productivity and engagement across teams.

As SMEs adapt to ongoing change, those that strengthen leadership — especially in areas like people management, decision‑making and change leadership — are better placed to improve retention, deepen customer relationships and enhance overall performance.

9. Articulating value is a key priority

Rather than competing solely on price, many UK SMEs are focusing on value. This means strengthening customer relationships, enhancing service quality, and clarifying their propositions. According to the American Express SME Barometer, 52% of SMEs plan to invest more in their business over the next year; 54% aim to improve communication with customers; 42% plan to offer additional services; and 33% expect to introduce more special offers, showing a clear shift towards deeper customer engagement.

10. SMEs are thinking more strategically than ever

Evidence from multiple surveys shows that businesses are taking tangible steps this year to strengthen resilience and prepare for growth. A recent survey of London SMEs found that 90% had made strategic changes over the past six months to navigate current challenges, such as switching to more affordable suppliers, introducing new products or services, and investment in technology and AI.

SMEs are not waiting for stability to return before acting. They are making deliberate, strategic choices now—diversifying income streams, professionalising operations, and using technology to create efficiencies.

Looking ahead to 2026

At Tigris Consulting and Mediation, we work with SMEs to help them plan their sales, business development and growth, develop their leadership skills, provide interim leadership or fractional marketing support. We also provide one-to-one coaching and mentoring for senior leaders to help them make important and strategic decisions for 2026. For more information, email hello@tigrismanagement.com