Worse than Covid: Half of UK small businesses fear collapse as economic pressure deepens

London, July 2025: Over half (54%) of UK 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.

These findings come from Built for Bigger Things, a new study by Dext surveying 500 SMB leaders nationwide, revealing a sobering picture of instability stalling growth, crippling ambition and clouding strategic vision across the UK’s entrepreneurial base.

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.

“We’re past resilience. These businesses are stuck in survival mode, and too many are close to giving up,” said Sabby Gill, CEO of Dext. “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.”

Admin overload and lack of planning draining time, ambition and growth

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 Many SMBs rely on outdated tools, overstretched leaders and weak financial planning, making it harder to adapt.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.

And despite being in the AI era, 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.

“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.”

No one is immune: Sector, size, age and region shape the struggle

The report reveals stark contrasts across regions, sectors and demographics, challenging assumptions in many cases:

• Covid-hit sectors say today is worse: Retail and hospitality (65%) and arts and culture (64%) SMBs are most likely to say today’s conditions are worse than Covid
• Northern grit: In Yorkshire & Humber, 71% are still prioritising growth (vs under 50% in London). In Leeds, 60% say external economic pressures have not influenced decision-making (vs 29% nationally). Just 19% of Manchester firms have delayed or cancelled growth plans, below the 25% UK average
• Digital natives, manual habits: 45% of 25-34s still use spreadsheets (vs 32% for 55+), and only 3% are fully automated (vs 11% for 55+). A third (32%) spend 21-40+ hours/month on admin - nearly triple the rate of older peers
• Older leaders worry most about economy: 63% say today’s climate is worse than Covid (vs 53% of 25-34s). Just 29% of 55+ are confident they would navigate a recession (vs 71% for 25-34s)
• Larger firms, deeper strain: Among 100-249 employee SMB leaders, 61% fear closure from a sudden cost spike. Half of those in the £50-100m SMB bracket question whether it’s worth continuing at all while £100-500m leaders are most likely to prioritise work-life balance (43%)
• Newer firms, early-stage fragility: 76% of 1-2 year-old firms say planning is impossible, 37% have sought emergency funding, but they’re also most likely to revisit financial plans regularly - showing future promise, if they can make it

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

###  

NOTES TO EDITORS

Media contacts

Sofia Cabrera, Senior PR & Communications Manager

sofia-louise.cabrera@dext.com

Harvard Public Relations

dext@harvard.co.uk

About the data

The Built for Bigger Things quantitative research study was commissioned by Dext and conducted by Censuswide. It surveyed 500 senior decision-makers at UK small and medium-sized businesses (1-249 employees) across a range of industries. Fieldwork took place over a two-week period in May 2025.

About Dext

Dext, part of the IRIS Software Group, is the world’s leading provider of AI-powered bookkeeping automation. Since 2010, Dext has empowered accountants, bookkeepers, and businesses to thrive by eliminating the manual work that slows them down. Its advanced AI, trained on more than 1 billion receipts and invoices with 99.5% accuracy, streamlines the capture, coding, publishing, and reconciliation of financial data, giving professionals more time to add value and grow.

Trusted by over 12,000 accounting and bookkeeping firms and 700,000 businesses worldwide, Dext integrates seamlessly with all major accounting software and connects to more than 11,500 banks, suppliers, and marketplaces. As part of IRIS Software Group since 2024, Dext continues to innovate with its clients to deliver a more seamless, end-to-end accountancy workflow that enables smarter, more timely financial decisions.

For more information, visit www.dext.com