The research from not-for-profit, Virgin StartUp, reveals that many founders are calling on Westminster to take further action including:

• A clear long term strategy for SMEs (66%)
• Increase support for businesses in local regions outside of London (69%)
• An overhaul of business rates (63%)

Current SME concerns

Amid ongoing economic and political uncertainty, concern for the future of SMEs is growing. More than half (57%) of founders are worried about their business’s survival over the next 12 months, a rise from 50% in last year’s Founder Barometer survey. The cost of living crisis (33%) remains the top challenge founders are facing, though this has eased significantly from 52% in 2024. Other leading challenges include the fear of another recession (20%) and tax rates (19%).

Access to finance is another concern. Nearly one in five (19%) identified this as a significant challenge to running their business and 62% expressed the desire for greater support in accessing capital, reflecting the difficulties many face with traditional lenders.

Cathy Homer, Founder of Posh Pudding Pots, said: “As a founder of a luxury dessert brand, I’ve experienced first-hand how overlooked small businesses can feel, especially those of us based outside of London. The reality is, we’re not just building brands, we’re driving innovation, creating jobs and adding value to local economies. But we can’t do it alone. We need a government that recognises our challenges, champions regional growth and makes access to funding less painful.”

Future outlook

However, it’s not all bleak, despite the rising business and staffing costs and turmoils, founders remain resilient. Half are optimistic about their financial outlook and confident their business will be in a stronger position in six months’ time, an increase from 45% in 2024. However, those most optimistic are the founders employing staff – only 8% of sole traders share this outlook compared with 47% of SME founders with 2+ members of staff.

Looking further ahead, over the next 12 months, many plan to prioritise:

• Increasing their sales (48%)
• Expanding their product offering/services (30%)
• Becoming more sustainable (28%)

Andy Fishburn, Managing Director at Virgin StartUp said: “Small business founders are the backbone of the UK economy, yet the research highlights a large proportion are feeling under pressure in the current economic climate, and it’s concerning that so many are feeling overlooked by those who serve them. Despite the challenges many face, we’re encouraged to see founders remain resilient, as they focus on growth, sustainability and innovation.”

Louis Collin, Founder of Drink Local, said: “Pubs are at the heart of British culture & community – but they’re facing huge challenges; rising costs & staff shortages, compounded by an incredibly tough Budget. We must cherish this vital part of our national identity, which means targeted government support is essential. Initiatives like the £300k Summer Streets Fund & new licensing powers are definitely steps in the right direction, but much more is needed to protect our wonderful industry!"

Underrepresented founders

More than half (53%) of founders believe it’s important Westminster improves funding and support for underrepresented founders. The environment for these founders still has room for improvement:

• Fewer than half (44%) say the current landscape is supportive of ethnic minority founders
• Just 40% say the same for neurodivergent founders
• 49% believe the industry is supportive of female founders, yet, the investment gap still remains

Currently, only 2% of venture funding goes to all women teams despite one in five start-ups being led by a female founder.

AI adoption is on the rise

The research also shows that founders are embracing innovation and the latest technologies; increasingly adopting AI in their businesses. 45% have used AI tools this year, compared with only 34% in 2024. This advancement is set to continue as 46% are planning to integrate AI tools within their business over the next 12 months. Attitudes towards AI continue to shift as more than half (54%) believe AI will have a positive impact compared with 45% last year. Founders are looking to leverage AI to:

• Save time (20%)
• Drive innovation (16%)
• Boost creativity (16%)

Fishburn continued: “Founders who lean in and embrace the technology, will outpace those who don’t. It’s an opportunity to create leverage as a founder – allowing you to achieve more with less and access expertise that was once expensive or inaccessible, so it’s great to see more founders adopting this into their businesses. Despite this, there are lots of potential shadow effects with AI and it’ll be interesting to see how founders navigate this going forward.”

Community remains vital

Networking and community play a pivotal part in entrepreneurial success. Nearly half (47%) say it has helped businesses find new clients and customers, while nearly a third (30%) use their community to gain industry advice and insights. A quarter (26%) said their network has provided them with emotional and moral support, which is more important than ever as half of founders (51%) report experiencing more instances of burnout in 2025.

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