Half of small businesses fear collapse as economic pressure deepens

As economic pressure mounts and further tax hikes loom, over half (54%) of small and medium-sized businesses (SMBs) say one more major cost hike could force them to shut down. The same number believe today’s economic climate is even more volatile than the Covid-19 crisis, according to research by Dext.

The research shows that a year of soaring costs, tax changes, global trade uncertainty and shifting demand has left many firms in survival mode. Nearly a quarter have paused growth plans, almost half (46%) have faced cashflow issues or turned to emergency funding, while 27% have cut staff or frozen hiring. Meanwhile, strategic decision-making has ground to a halt, as 53% say planning is virtually impossible.

The study shows internal inefficiencies are compounding the macroeconomic crisis. Many SMBs rely on outdated tools, overstretched leaders and weak financial planning, making it harder to adapt.

Over a quarter (27%) spend 21-40+ hours each month on financial admin – nearly a full working week lost. The emotional toll is high: 40% call financial admin “soul-destroying”; 38% say it drains energy for growth; 36% say they’ve lost sight of why they started their business.

Admin is also blocking progress. 37% spend more time on finance than growing their business; 35% have missed business opportunities due to it; and 48% believe they’d be better leaders without the finance burden.

What’s more, most lack a robust financial strategy. Just 29% conduct recession scenario modelling; 27% revisit decisions based on new data; only 23% review performance regularly. Manual processes still dominate: 58% of UK SMB  financial management is manual, only 4% of businesses are fully automated. While many have in-house or external professional accountancy support, one in five (22%) still manage finances solo and 10% rely on informal help from friends or family.

 Sabby Gill, CEO of Dext said “We’re past resilience. These businesses are stuck in survival mode, and too many are close to giving up. Without urgent support, we risk losing a generation of entrepreneurs and the backbone of the UK economy, not just to economic pressure, but to exhaustion.

“Small businesses are being pushed to the brink by macro pressures and micro inefficiencies,” added Gill. “Without time, headroom or real-time visibility, they can’t lead confidently. Every day this continues, we lose growth potential.

“We call SMBs the lifeblood of the economy, but many are bleeding time, energy and belief. The challenge now isn’t just survival, it’s protecting the ambition that powers this vital sector.”