Economic confidence of UK SMEs drops amid uncertainties

New research from Vistage reports a decline in economic confidence among leaders of small and medium-sized enterprises (SMEs) in the UK, amidst broader concerns following the Chancellor's recent Spring Statement.

The Q1 2025 CEO Confidence Index, released by Vistage, indicates a drop in economic confidence from 91.4 to 87.5, with more than half (53%) of respondents suggesting that economic conditions have deteriorated over the past year. The report also reveals that 41% of SME leaders anticipate further economic decline in the next 12 months.

This economic sentiment follows the Spring Statement, where the provision of support initiatives for SMEs was seen as limited, and significant reductions in welfare benefits are anticipated to affect consumer spending adversely.

Amid these challenges, the report finds that over a third (34%) of business leaders are advocating a return to full-time office work. Among these leaders, 21% believe in-person work could enhance productivity and collaboration, while 34% argue it would bolster company culture and team cohesion.

The intention to reinforce team dynamics is mirrored in SME hiring plans; 31% of SMEs still intend to expand their talent pool, reflecting a cautiously optimistic hiring approach despite economic uncertainties.

Moreover, small businesses are increasingly adopting artificial intelligence (AI) technologies. The report notes that nearly two-thirds (65%) of SME leaders and 70% of CEOs are engaging with AI to improve business efficiency.

Additionally, 46% of SMEs have implemented formal AI policies to ensure appropriate use, and 50% are investing in training their workforce to integrate AI seamlessly into business processes.

Looking ahead, while more than half (56%) of SME leaders foresee an increase in sales revenues in the coming year, expectations for profits remain guarded. Only 38% expect profits to rise, with another 38% predicting they will remain steady.

Rebecca Drew, Managing Director of Vistage UK & Ireland, commented: "Our latest CEO report highlights that while SMEs are navigating significant economic uncertainty, their resilience remains strong. Despite a drop in confidence levels, with many leaders feeling the pressure, it's encouraging to see that over half are still expecting revenue growth."

"Another key trend we're seeing is the growing emphasis on strengthening team dynamics, whether by bringing teams back into the office or integrating AI to improve business efficiency," she added.

"With the recent Spring Statement introducing further budget cuts, businesses are now dealing with additional challenges. Yet, it's promising that many leaders continue to invest in talent and innovation. At Vistage, we're supporting these leaders to navigate these shifts and make decisions that set them up for long-term success. The ability to adapt, invest in the right areas, and make bold decisions will be what ultimately separates the thriving businesses from those that struggle in the coming months."