UK SMEs face a loss of £138,000 in income by 2025 amid Labor Budget estimates.
SMEs across the UK are bracing for major financial challenges by 2025, with new research showing an expected loss of £138,000 in revenue per business.
According to research by freelancer platform Fiverr, a quarter of businesses expect to lose more than £100,000 due to financial pressure from the Labor Autumn Budget.
Despite a modest interest rate cut by the Bank of England, Labour’s proposed £40 billion tax hike—part of which will directly affect businesses—has fueled anxiety among SMEs as they head into the coming year. Key issues of concern to business leaders include inflation and rising costs (50%), UK economic stagnation (45%), and the wider implications of Labor tax policies (37%).
Revenue Challenges and Downsizing
The recent Budget announcement caused widespread concern among UK businesses, with more than half (54%) citing the current political climate as the main driver of operational instability. A large 83% believe that proposed changes to labor budget policies and an increase in the national minimum wage will have a negative impact on incomes.
Shockingly, 76% of business leaders see labor tax policies as having a negative impact on employee pay, while 60% envision downsizing and hiring freezes next year. This expected workforce adjustment reflects increased financial pressure on SMEs amid new financial measures.
Mixed Feelings About Workplace Trends
Despite these challenges, some hope remains among business leaders. The data shows that 62% believe that Labor’s focus on improving workers’ rights could have a positive impact on workers’ mental health, providing a glimmer of hope in a turbulent environment.
UK businesses are also open to adopting new ways of working. Half of the leaders who were interviewed expressed that they are willing to try a four-day working week, although 24% doubt its success under labor management. Additionally, 61% support a back-to-the-office (RTO) model at least three days a week, citing improved productivity (61%), improved collaboration (40%), and better opportunities for professional development (38%) as key benefits. .
However, leaders also see a potential decline in approval to go to the office. Half believe that enforcing RTO policies could harm employee retention, and 26% fear it could create conflict and lower morale in the workplace. About a quarter are concerned about the impact on employees’ work-life balance and the possibility of increased operational costs associated with the change.
Focus on AI and Technology Roles in Recruitment Systems
Despite economic pressure, more than half (55%) of UK businesses plan to increase their workforce by 2025, while 33% intend to maintain existing workforce levels. Hiring trends show an increase in digital innovation, with almost half (48%) focusing on IT and technology roles, and 24% focusing on artificial intelligence (AI)-specific positions.
Fiverr’s 2024 UK Future Workforce Index reveals that businesses are willing to offer an average of 45% higher salaries to graduates with AI skills, with more than 80% of leaders willing to pay a premium for these skills. In contrast, demand for creative and design roles remains subdued, with only 19% of businesses hiring in this area.
Advances in AI are influencing hiring decisions, with 43% of businesses citing this as a reason for postponing hiring. Regulatory changes (34%) and budget constraints driven by the ongoing cost of living crisis (33%) are also important factors.
Freelancers Key to Closing Skills Gaps
Freelancers are emerging as important contributors to the workforce, as 55% of businesses already include freelancers in their teams. Almost a third (32%) use autonomous technology in AI. Looking ahead, half of UK business leaders see freelancers as essential to achieving their goals by 2025, and 45% plan to increase their reliance on freelancers in the coming year.
Hila Harel, Director of International Growth at Fiverr, commented: “As the UK navigates the challenges ahead, it is encouraging to see business leaders increasingly turning to freelancers to help cope with economic volatility and changing workplace conditions. With the four-day work week and back-to-the-office policies gaining momentum, it’s clear that workplace flexibility is a priority. As 2025 approaches, we look forward to seeing the private sector play a bigger role in supporting businesses—not just in adapting to an uncertain climate, but also in driving growth and innovation amid ongoing challenges.”
