57% of London SMEs Confident About 2025 Despite Rising Costs and Economic Pressures

Running a small business in the UK is no easy task. From supply chain disruption, shifting consumer demand, and fluctuating inflation levels, business owners are navigating an unpredictable environment.

With this in mind, SumUp surveyed 750* UK business owners and decision makers within small UK businesses to see how confident they feel about the state of the current UK market, their top growth priorities for the next 12 months, and how their confidence levels stack up against last year.   

When it comes to SMEs in London, what are their confidence levels and outlook for the year ahead?

Confidence levels among London SMEs: 2024 vs 2025

Almost half (49%) of SMEs in London reported a stronger business performance this year, compared to last, including growth across key areas. Following this, we asked how confident they feel about the year ahead. 

Despite a slight dip in confidence overall, the outlook remains broadly positive among London’s small business community. While 57% report confidence about the year ahead, including 25% who are very confident. This marks an 11-point drop from last year, as some take a more cautious stance amid ongoing economic pressures.

Only 4% of respondents said they felt somewhat concerned, with just 1% not confident about the future of their business. Meanwhile, 38% described their outlook as neutral or uncertain, expecting their business to remain steady without significant growth or decline. 

Current challenges faced by London SMEs:

While a third (34%) of SMEs report a stable business performance compared to last year, 15% noted a slight decline, though they remain generally stable. When asked about what the current challenges were among business operations, rising costs pose the biggest concern for small businesses across London. 

Almost half (46%) of respondents identified the overall economy as their most significant challenge, including interest rates, inflation, and changes in consumer disposable income. Rising costs remain a major concern, with 44% struggling with raw materials and 40% with bills such as energy, rent, and gas.

Oer a third (35%) of SMEs report reduced customer spending, while 31% say retention is becoming harder. A similar proportion (30%) are also concerned about losing customers to competitors offering better prices or convenience.

How SMEs are staying on top of current concerns:

Nine in ten (90%) SMEs in London have made strategic changes in the past six months to navigate current challenges and remain resilient, which have resulted in a positive impact on their business performance. 

Several cost-saving measures have been put in place by SMEs, with 38% switching to more affordable suppliers and 33% changing service providers like energy or broadband. 

In response to market conditions, almost a third (30%) report a positive impact on their business performance by raising prices to help improve their profit margins, while 22% have had success in lowering their pricing structure to line up with consumer spending habits. 

Other effective strategies include introducing a new product or service (28%), enhancing their digital presence through social media or by opening their own website (27%), or upskilling staff or hiring new talent (25%). 

AI adoption on the rise among London SMEs: 

As small businesses look for new ways to drive growth and improve operational efficiency, AI is emerging as a key area of focus.Almost two thirds (63%) of SMEs say they have either already adopted AI tools or plan to do so in the next 12 months, while a further 15% are interested and may consider adoption after further research. 

When asked how they view the role of AI and emerging technologies, the response was largely optimistic. Over a third (35%) of business owners and decision makers see AI mostly as an opportunity, highlighting its potential to drive growth or increased efficiency. A further 24% acknowledged both the opportunities and risks associated with the technology.

However, not all SMEs are fully convinced. Over one in six (17%) say they view AI mostly as a threat, fearing potential for automation and the potential to replace aspects of their business. Meanwhile, 5% expect it to have minimal impact in the near future.

Digital transformation remains high on SMEs’ priorities:

Beyond AI adoption, digital transformation is emerging as a focus for many SMEs. Almost half (44%) of small business owners and decision makers believe that embracing innovative technology, improving their digital presence, and staying ahead of digital trends is very important to their long-term success. Whether through social media or digital payments, businesses are recognising they need to modernise to stay competitive. 

A further 31% say digital transformation is somewhat important, highlighting a measured approach and that they are taking small steps to improve their technology, although other business priorities take precedence.

Only 9% say technology is not a major priority, showing that the vast majority of SMEs see value in staying ahead of digital trends.

Together with AI adoption trends, this reflects a broader digital shift across the UK’s small business landscape, where innovation is increasingly linked with resilience and growth.

Priorities for growth over the next year.

When it comes to growth priorities, SMEs are prioritising financial stability and exploring new growth opportunities. Top priorities include improving profit margins (42%) and cutting costs or debt (34%). To achieve this, 35% are diversifying income streams through e-commerce, physical store, or social media platforms. Others are focused on securing funding (19%), launching new products (19%), boosting efficiency (18%), and preparing for economic uncertainty (14%).

Corin Camenisch, Product Marketing Lead at Sumup commented on the survey: “As champions for small merchants, we conducted this survey to discover the confidence levels of small business owners and decision makers in the UK to better understand the challenges they face, gauge their optimism about their future, and identify areas where support for SMEs might be needed. 

“Overall, confidence levels of small business owners and decision makers across the UK are high. This positive outlook suggests that small merchants are prepared to navigate potential uncertainties and continue to thrive. 

“We have provided tips off the back of our findings for those just starting out in business, or who are looking to deal with unexpected market fluctuations on our full campaign page.”

For more information and business advice, please visit the full campaign page here: https://www.sumup.com/en-gb/business-ideas/uk-business-confidence-report-2025/