Despite the Bank of England’s modest interest rate cut, Labour’s proposed £40 billion tax hike – half of which will directly fall on businesses – has intensified financial pressures on SMEs as they prepare for 2025. Key concerns for business leaders include inflation and rising costs (50%), economic instability in the UK (45%), and the broader implications of Labour’s tax policies (37%).

UK businesses expect revenue challenges amid Labour’s Budget

The recent Budget announcement has sparked widespread concern among UK businesses, with over half (54%) citing the current political climate as a key driver of operational instability. An overwhelming 83% of businesses believe that proposed changes to Labour’s overall budget policies and the increase in the national minimum wage will impact their revenue. Alarmingly, three in four business leaders (76%) foresee Labour’s tax policies negatively impacting workers’ pay, while 60% are considering headcount reductions and hiring freezes over the next year.

Despite these challenges, some optimism remains; the data reveals that 62% of leaders believe Labour’s focus on improving workers’ rights could positively impact employee mental health, offering a glimmer of hope, amid an otherwise turbulent outlook.

SMEs embrace RTO and four-day work week but fear employee retention 

UK business leaders are open to new workplace trends, with 50% open to trialling a 4-day work week, though 24% doubt its success under Labour. Meanwhile, 61% back a return-to-office (RTO) model of three-plus days per week, citing improved productivity (61%), collaboration (40%), and professional development (38%) as the main benefits of returning.

However, leaders recognise the potential downsides of RTO policies. Half believe mandating office attendance could harm employee retention, while 26% fear it may create friction and lower workplace morale. Additionally, nearly a quarter of business leaders are concerned about the strain on employees’ work-life balance and the potential for increased operational costs associated with the shift.

AI and tech roles dominate 2025 hiring plans, with freelancers key to bridging skills gaps

Despite economic pressures, over half of UK businesses (55%) plan to expand their workforce in 2025, while 33% intend to maintain current staff levels. Hiring priorities point to a surge in digital innovation, with nearly half (48%) focusing on IT and tech roles, and 24% targeting AI-specific positions. Fiverr’s 2024 UK Future Workforce Index reveals businesses are willing to pay a premium for AI skills, with over 80% of leaders prepared to offer an average of 45% higher wages for candidates with AI expertise. In contrast, demand for creative and design roles remains subdued, with only 19% of businesses planning hires in this area, highlighting a need for greater support for workers in this sector.  

A range of factors are influencing hiring decisions. Advancements in AI are the leading reason businesses may scale back recruitment (43%), closely followed by regulatory changes (34%), and budget constraints driven by the ongoing cost of living crisis (33%).  

Freelancers are emerging as critical workforce contributors with 55% of businesses already integrating freelancers into their teams and nearly a third (32%) leveraging their expertise in AI. Looking ahead, half of UK business leaders view freelancers as essential to achieving their goals in 2025 and 45% plan to increase their reliance on freelancers in the coming year.

Hila Harel, Director of International Growth at Fiverr comments: “As the UK navigates upcoming challenges, it’s encouraging to see business leaders increasingly turning to freelancers to help tackle economic instability and evolving workplace trends. With the four day work week and return to office policies gaining momentum, it’s clear that workplace flexibility is a top priority. As 2025 approaches, we look forward to seeing freelancers play a greater role in supporting business – not just in weathering uncertainty, but also in driving growth and innovation amid ongoing challenges.”