SME growth strategies from the frontline

Small and medium-sized enterprises continue to form the backbone of the UK economy, yet 2025 has introduced disproportionate challenges. Research from the Vistage CEO Confidence Index for Q2 2025 shows that while confidence among SMEs in the UK and Ireland has risen modestly, from 87.5 in Q1 to 89.5, business leaders still face persistent pressures. With rising costs, new international tariffs, ongoing talent shortages and global uncertainty, leaders are forced to rethink pricing, hiring and investment plans to secure their futures in an unpredictable environment.

Among these challenges, the US government’s tariff announcement in April 2025 has ushered in a new phase of volatility in global trade. Supply chains are being disrupted and inflationary pressures intensified, forcing many SMEs to reconsider not only how they grow but also how they build operational resilience. This evolving landscape demands fresh strategies. SMEs must adapt to thrive amid ongoing uncertainty. Managing costs, supporting frontline teams, addressing workforce challenges and embracing technology are all part of the equation. But as global trade becomes increasingly unpredictable, international pressures are playing a bigger role in shaping strategy.

Trade volatility forces a new strategic outlook —

According to Vistage research, the tariffs imposed by the United States are already impacting UK SMEs. Around one in three CEOs report direct negative effects, such as higher input costs and shipment delays. More than one-third also identify indirect challenges, including fluctuating customer demand and broader market uncertainty. As a result, many businesses are reconsidering their ambitions for international expansion, especially into the EU. While some have postponed growth plans, others are actively exploring ways to increase operational flexibility. Trade uncertainty has thus moved from a minor concern to a central factor influencing business strategy.

Rising costs and pricing pressures —

The inflationary environment remains a significant challenge for SMEs, as higher wages, energy prices, and material costs are squeezing margins. As a result, over a third of businesses plan to raise their prices within the next three months, typically by between four and six per cent. In response to these pressures and to protect profitability, many businesses are focusing on improving internal efficiencies, streamlining procurement and cutting waste, highlighting that operational improvements are becoming as important as revenue growth. 

Workforce challenges demand new approaches —

Talent shortages remain a critical barrier to growth. Our data revealed that nearly half of SME leaders say the recently proposed UK-EU youth mobility scheme will make little difference to their hiring needs, and only five per cent believe it will significantly help address talent shortages. Meanwhile, recruiting for specialist leadership, technical and frontline roles remains difficult for SMEs. The report notes that these positions, along with labour roles in construction, manufacturing and healthcare, are hard to fill due to skills gaps and fewer applicants.

In response, many leaders are shifting focus from expanding headcount to maximising productivity. In response, many SMEs are embracing technologies such as automation and artificial intelligence, while also investing in leadership development and upskilling to maximise the potential of their existing workforce.

Barriers to AI adoption —

Artificial intelligence offers clear productivity benefits, but nearly half of SMEs surveyed report lacking the technical skills to implement AI effectively. Similarly, 43 per cent say they struggle due to the absence of a clear AI strategy or roadmap. Internal resistance to change also presents challenges, with one in four leaders indicating employee reluctance is slowing adoption.

For SMEs to benefit fully from AI, investment must go beyond technology. Building organisational skills, fostering an innovative culture and managing change effectively are vital to embedding digital transformation as a core element of business resilience.

Leadership burnout takes centre stage —

Economic and geopolitical pressures are clearly taking a toll on leadership, with almost one in five CEOs rating their work-life balance as poor and 43 per cent experiencing occasional burnout, 20 per cent of whom report it frequently. Even during time off, 60 per cent are unable to fully disconnect, highlighting the mounting personal cost of navigating prolonged uncertainty. 

This raises critical questions about leadership sustainability and how long CEOs and business owners can maintain this pace without stronger support systems or healthier boundaries. Prioritising wellbeing is essential to building resilience and sustaining performance amid continued economic challenges.

A shift towards long-term resilience —

Despite the many pressures SMEs face, there is a clear shift from short-term survival tactics towards deliberate, strategic transformation. Business leaders are prioritising margin protection, workforce strategy and operational agility to build lasting resilience.

This shift reflects an understanding that resilience is not simply a reaction to crisis but a proactive approach to prepare for future uncertainty. By investing in flexibility, strengthening people strategies and enhancing operational capabilities, UK SMEs are positioning themselves to withstand ongoing disruption and capitalise on growth opportunities when conditions stabilise.

As 2025 unfolds, SMEs must continue balancing ambition with pragmatism. Tariffs, inflation and talent shortages are unlikely to ease in the near term. However, those businesses that embrace change and invest strategically in their people, processes and technology will be best placed to survive and advance.

The Vistage CEO Confidence Index for Q2 2025 highlights that the most resilient SMEs are already laying the foundations for sustainable growth by focusing on core strengths and operational excellence. In an unpredictable world, it’s clear that resilience is the armour that shields businesses navigating today’s economic battlefield.