Businesses in the UK are facing higher levels of “economic strain” than their European neighbours, according to new research from tax and accounting firm Wolters Kluwer.
The revelation comes just days before the new business rates take effect across the UK, with a warning from the Federation of Small Businesses (FSB) that 340,000 ventures could close entirely.
56% of UK SMEs surveyed listed challenging economic conditions and rising costs among are their biggest challenges in the year to come, compared to an average of 40% among SMEs based in the other seven European nations featured in the survey.
Challenging conditions
Wolters Kluwer’s 2026 Future Ready Business Report brought together survey responses from more than 1,000 financial SMEs across Belgium, Denmark, Germany, Italy, the Netherlands, Spain, Sweden and the UK.
What the team found was a disparity between the financial load that the UK SMEs are reporting and that of the other countries.
It’s clear to see why, too, with UK businesses currently bracing for a rise in business rates and the National Minimum Wage and Living Wage, as well as soaring energy costs. So, it’s no surprise that “managing costs and cash flow” was highlighted by 46% of UK businesses as an important issue, whereas just 34% of European SMEs identified it as a big concern.
This, combined with the loss of Pandemic-era business rate relief, has made operating incredibly difficult for huge swathes of the country’s small business community.
Regulation ready
Encouragingly, however, the team also reports that businesses this side of the Channel are more ready for regulatory changes than their counterparts, with 44% of businesses stating that they are fully prepared. This placed the UK ahead of the Netherlands (31%), Germany (32%) and Sweden (16%).
“UK SMEs are under more economic pressure than any of their European peers, but they’re responding differently,” said Bas Kniphorst, Executive Vice President & Managing Director, Wolters Kluwer Tax & Accounting Europe, told The Financial Times.
He continued: “UK SMEs stand out for prioritising regulatory readiness and leaning heavily on trusted advisors to navigate complexity. They’re taking a selective, pragmatic approach to digital investment, focusing on tools that deliver fast efficiency and control to build resilience even as cost pressures remain high.”
Focussed on technology
Technology is playing a key role in this. The report found that around 65% of UK SMEs say that they are using AI tools either daily or weekly.
Alongside AI, businesses are also focusing on using the Cloud, with 54% of UK SMEs now operating in hybrid cloud environments, while 26% are fully cloud-based. However, our ventures are behind the European average when it comes to planned adoption or expansion of cloud solutions in the coming year, at only 36%.
The team also looked at cybersecurity and found that nearly half of the UK businesses questioned have upgraded the protection that they have in place over the past three years, and another 37% have upgrades planned.
External help
Where UK ventures do not have the expertise they need, the report suggests that they are happy to bring in external advisors. The top want was IT and tech service providers, and was named by 73% of respondents. Accountants and business service providers came in next at 57%.
Indeed, nearly three-quarters of UK SMEs say that they outsource at least one of their core business functions to an external contractor.
As Natasha Chryssafi, Senior Director – Product Management, Wolters Kluwer Tax & Accounting, commented: “Under sustained cost pressure, the businesses coping best are focusing on cash‑flow discipline, outsourcing complex compliance tasks, and adopting digital tools, including AI, where they solve a real, day‑to‑day problem. By using advisors strategically and investing where it counts, SMEs are creating breathing room in an otherwise tight environment.”
While the report recognises that UK SMEs are facing considerable financial pressures, there are certainly reasons to be upbeat; most specifically, their innovation and resilience in the face of economic strife. Pushing ahead with technological upgrades despite costs, and being prepared to bring in help when they need it, are two promising signs.
