Rising costs force small businesses to increase prices

The majority (74 per cent) of business owners are set to increase their prices in the next 12 months, according to data from our 2025 SME Insights Report. With higher running costs, a tighter tax burden, and uncertain consumer spending all contributing to the difficult decision.

Our SME Insights Report is a deep dive into the UK’s small businesses. It provides an overview of business confidence, their biggest challenges, and what support they need from the government.

You can download the full report here for a comprehensive look at what it’s like to be a small business owner in 2025.

Revealed: key threats to small businesses

The last five years have posed a range of challenges for small business owners. From Covid-19 to the cost of living crisis – entrepreneurs have had to adapt to rapidly-changing consumer behaviour and an unstable economy.

At the same time, they’ve also had to adapt to an unpredictable tax environment, led by two different governments.

When we asked small businesses owners to name their single biggest challenge in 2025, they said:

high running costs – 22 per cent
lack of/uncertain consumer demand – 20 per cent
unpredictable economy – 16 per cent
rising inflation – 13 per cent

But a rise in employers’ National Insurance contributions, higher material costs, and a lack of funding and investment were common challenges too. It’s clear small businesses are being hit with a huge variety of obstacles to overcome – and many are out of their control.

How do small business owners feel about the economy?

Small and medium sized enterprises make up 99 per cent of the businesses in the UK. They play a huge role in the economy, but they’re also exposed to its volatility.

After a period of high inflation, low investment, and ever-changing policy – we checked in with small business owners to see how they feel about the economy:

50%

expect the economy to get worse in the next 12 months

50%

expect the economy to stay the same or improve in the next 12 months

How are small businesses adapting to uncertainty?

Small businesses always need to adapt, but it becomes even more crucial in a challenging economy. However, there’s a concern the changes small businesses are making could harm their long-term growth.

When we asked small business owners how they were adapting to economic challenges, they said:

holding off on buying new equipment – 42 per cent
reducing their spend on marketing – 23 per cent
holding off on expanding or hiring new employees – 22 per cent

It’s a worrying trend that small business owners are increasingly unable to reinvest in their business. This could create a barrier to growth that will harm both the businesses themselves and the UK economy.

What small business owners need from the government

It’s clear that small businesses need more support from the government. But with such a wide range of challenges, it’s difficult to understand what would help them most.

When we asked what change the government could make that would have a positive impact, business owners said:

Simplifying the tax process
Reversing the employers’ National Insurance contributions increase
Making it easier to access funding and grants
Reducing or scrapping business rates
Encouraging consumers to shop locally

Looking ahead: optimism prevails?

Despite such a challenging environment for business owners, 57 per cent are ‘very’ or ‘somewhat’ confident about their business prospects over the next 12 months. And the number of new businesses in the UK is 2.8 per cent greater than in the same period last year, according to government figures.

But business owners cannot do it alone. With 30 per cent uncertain about their business prospects and a further 12 per cent pessimistic – support from the government and consumers is crucial.

Simply Business UK CEO, Julie Fisher, summarised the findings of the SME Insights Report, and emphasised the importance of supporting small businesses:

“Seeing so many SMEs across the UK struggling is a serious cause for concern, not just for the founders of these businesses but for the British economy and our wider communities.

“Providing over £2.8 trillion in annual turnover, and accounting for over half of all employment in the private sector, small businesses are critical to our economic prosperity. We must do everything we can to protect, support, and celebrate their spirit and resilience.”

More useful guides for small business owners

Ready to set up your cover?

As one of the UK’s biggest business insurance providers, we specialise in public liability insurance and protect more trades than anybody else. Why not take a look now and build a quick, tailored quote?

Start your quote