In 2025, many UK businesses find themselves in a paradoxical position: profitable on paper, yet struggling to stay afloat. These are not failing or mismanaged firms—they are well-run, productive companies that, in a different economic climate, would be thriving. But today, they are treading water, expending a lot of effort just to stand still.
The economic environment has become increasingly hostile, even for the most resilient small and medium-sized enterprises (SMEs). One of the biggest challenges in all sectors is the rising cost of employment. Recent increases in National Insurance contributions have significantly raised the cost of hiring and retaining staff. For SMEs, which form the backbone of the UK economy, this has created a financial squeeze. The cost of doing business has risen, but revenues have not kept pace.
Inflation continues to erode margins. From energy bills to raw materials, prices have surged across the board in the last 3 years – and while the pace of price inflation has come down, prices have not and simply continue to increase less quickly.
Even companies that have managed to pass some of these costs onto customers are finding that consumer demand is weakening under the pressure of the cost-of-living crisis.
Meanwhile, exporters face a different set of hurdles. Global trade tensions, shifting tariffs, and the lingering effects of Brexit have made international trade more complex and costly. Red tape and customs delays are now routine for firms dealing with the EU, adding both time and expense to every transaction.
In this climate, cash flow management has become a critical survival skill. Businesses are increasingly reliant on funding to spread the cost of essential operations. Supply chain, overheads, VAT and tax bills, and upfront costs for client work all require significant outlay before any revenue is received – often with a significant time gap between outlay and income.
For example, a construction firm may need to purchase materials and pay subcontractors weeks or months before receiving payment from a client. Without access to funding support, such firms are forced to delay projects or turn down new contracts altogether.
This hesitance to deploy working capital has a knock-on effect on productivity. When businesses are unable to invest in new equipment, hire additional staff, or take on larger contracts, their output stagnates. Opportunities are missed, not due to lack of ambition or capability, but because of financial caution. The broader economy suffers as a result. When productive companies are held back, GDP growth slows, and the ripple effects are felt across all sectors.
Anecdotally, many business finance lenders are reporting an uptick in the quality of the credit profile of applicant firms. This trend reinforces the notion that it is not distressed or high-risk businesses looking for support, but rather strong, creditworthy companies that need help navigating the current environment. These are firms with solid financial fundamentals, but they require external funding to maintain momentum and manage the growing time and frequency gaps between costs and cash inflows.
Funding, once seen as a tool for growth, is now increasingly used just to maintain the status quo. Invoice financing, revolving credit facilities, short-term loans and asset finance are being used not to expand, but to survive. This shift in purpose reflects a deeper disruption in the economy. Businesses are not asking for handouts—they are asking for breathing room.
The irony is obvious: these are good companies, with strong fundamentals and proven track records. But they are being forced to fight for financial stability in an environment that punishes success with higher costs and greater complexity.
The support they need is not extravagant. It is targeted, timely funding that allows them to manage cash flow, invest in productivity, and retain their workforce.
In summary, 2025 is not a year of bold expansion for many UK firms. It is a year of consolidation, of cautious navigation through turbulent economic waters. The funding requirements we see today are not about scaling up—they are about staying upright. If we want these businesses to thrive tomorrow, we must help them tread water today.
Mark Grant, Managing Director – Fiducia Commercial Network and Fiducia Commercial Finance