In a Challenging Economic Climate, Small and Medium-Sized Enterprises Show Unwavering Resilience
In the current economic climate, UK Small and Medium Enterprises (SMEs) are grappling with the impact of rising wage and National Insurance costs, as the National Living Wage rose by 6.7% to £12.21 in April 2025, accompanied by a 1.2% increase in employers' National Insurance Contributions. This financial strain is evident, with more employees relying on food handouts despite working full time, underscoring the challenges SMEs face in adequately supporting their workforce.
Amidst these difficulties, some government initiatives have been introduced to assist SMEs. For instance, the Employer Support Fund, launched for 2025–2026 in England, helps with costs related to hosting placements, although it does not directly address broader employee cost of living support measures. There's a growing consensus among social enterprise panels for structural economic reforms, such as tax relief and emergency grants, to better mitigate rising living costs.
While the cost of living crisis is a pressing concern, reducing carbon footprint is also on the agenda for many SMEs. According to recent data, 64% of SMEs are committed to reducing their carbon footprint, with the most common action being the implementation of waste reduction and recycling programs. SMEs run by younger people (aged 25-34) and those in the West Midlands are leading the charge in decarbonisation efforts.
One such SME championing carbon footprint reduction initiatives is Purbeck Insurance Services. The company, which is the UK's only provider of personal guarantee insurance to small business owners, has emphasised the importance of securing personal guarantee insurance when securing a new personal guarantee backed loan. This step protects business owners' and directors' personal finances in the event of business failure.
Purbeck Insurance Services has also been active in the community, hosting a free networking event, PGI Business Link, for professionals involved in SME lending on 4th June, in O'Neill's in Broad Street, Birmingham. Furthermore, a recent survey from Purbeck Insurance Services suggests that close to a third (29%) of UK SMEs have carried on business as usual with no Government support during the pandemic. The same survey also reported that 51% of UK SMEs have assisted their staff during the cost of living crisis.
In the second quarter of 2025, 24% fewer small and medium-sized businesses needed personal guarantee backed finance for business loans, according to Purbeck Insurance Services. This decrease suggests that SMEs are managing their finances more efficiently, despite the economic challenges. Staff retention remains healthy across the SME community, with the smallest businesses (1-9 employees) seeing the best results.
In conclusion, UK SMEs are navigating a complex landscape, balancing the pressure of the cost of living crisis with the commitment to reduce their carbon footprint. While government initiatives offer some support, there is a growing call for more comprehensive measures to alleviate the financial strain on SMEs and their employees. Meanwhile, SMEs are demonstrating resilience and innovation in their efforts to reduce their carbon footprint, with Purbeck Insurance Services playing a significant role in this journey.
- The Employer Support Fund, while helping SMEs with the cost of hosting placements, does not provide direct support for broader employee cost of living measures, highlighting the need for more comprehensive government initiatives to address the financial challenges small businesses face in supporting their workforce.
- Despite the economic troubles and the cost of living crisis, many small-businesses are prioritizing the reduction of their carbon footprint, with initiatives like waste reduction and recycling programs being commonly implemented, especially among SMEs run by younger people and those based in the West Midlands.
