The biggest threats to UK small businesses right now

And the actions business owners are taking to protect them

Small businesses¹ (SME) in the UK currently make up 99.9% of the country’s business population. This is especially impressive as we live in a post-pandemic world, with the pressures never higher on SMEs.

Towergate last surveyed SME owners on the threats and key impacts on their businesses in 2022, but to help small businesses navigate today’s climate, we have all new nation-wide data and insight to share.

We can reveal, the top threats small business face in 2024:

  • Rising operational costs are the top threat at 47%
  • Economic uncertainty/the impact of Brexit at 32%
  • The effect of the pandemic/health crisis at 31%

Three years on from Covid-19, businesses are still feeling the effects, combined with the impact of cost-of-living crisis, a recent switch in government and economic uncertainty from the aftermath of Brexit.

And although the first year for new businesses looks promising with just 4% ceasing trading, by the end of their second year a third (34%) have done the same, and within 3 years of opening, 50% of SMEs will no longer trade.

The most common threats faced by UK small businesses

We asked small business owners how vulnerable they feel their business is to threats in 2024, and 78.2% believe they are. This figure was higher in 2022, with 86.4% of SME owners feeling this way.

Have SMEs almost got used to the stakes being high in business? Due to the ever-challenging factors they’ve had to face since the pandemic – maybe. But what are the biggest threats to their business today.

According to our recent survey, these are the most common threats to small businesses in the UK.

The most common threat to small businesses in the UK is rising operational costs (such as rent, utility bills, staff wages) with almost half the businesses surveyed (47.4%) naming this the top concern. Economic uncertainty and the impact of Brexit on trading is the second top threat (32.4%), and the third 2024 threat to SMEs are health crisis/pandemics (32%).

In contrast to the 2022 results, 2024 shows all new findings when it comes to threats to SMEs. Previously the top three threats reported were supply chain demands (32%), businesses retaining a uniqueness (27.7%), and thirdly changing customer demands (26.5%).

The top threat of rising operational costs has impacted the retail and leisure (33.8%), and healthcare (33.3%) sectors the most. And overall, 24.8% named this threat as the most departmental to their business.

This threat has transpired, but what impacts are the top threats having on UK small businesses as they become a reality too?

In 2024 57.3% of SMEs are experiencing a reduction in profits, 47.4% are feeling a loss of revenue, and 36.1% have a declining customer base.

The reduction in profits has increased by 96.56% since the 2022 survey where a third of small businesses in the UK (29.1%), reported this as the lead impact. Loss of revenue was a similar figure then (27.9%), and a decline in customers was felt by 1 in 4 (25.8%) of businesses.

The explosive combination of rising costs across multiple areas for businesses and their customers alike; the ripple effect of the UK’s exit from Europe, and the country’s economic standing looking to be shaky are all bearing down on these results.

When questioned about the recent change of government and the impacts on SMEs, 27.6% of owners felt the impact would be positive, while 29.6% felt it could negatively impact their business.


The sectors feeling positive change is afoot are sales, media and marketing (42.5%), our healthcare sector also felt the same way (41.6%), and IT and telecoms too (34.1%).

The not so convinced and feeling the change in government could impact them negatively is the travel and transport sector with a noticeable 50% saying this, followed by architecture, engineering and building (38.8%), and the arts and culture sector with 34.3% concerned.

The sectors most vulnerable to threats

The significant changes continue as we look at the sectors being hit the hardest in 2024. Our survey has revealed the all-new top three sectors most vulnerable to threats as:

  • The finance sector at 48.8% vulnerability
  • IT and telecoms next at 43.8%
  • Arts and culture 38.7% third vulnerable

Interestingly, just 1 in 5 (21.6%) of small businesses feel that they’re at risk of closing during their first year compared to 1 in 2 in 2022 - suggesting current SMEs have a resilient mindset.

Breaking the results down further, the top three threats per sector are:

Finance face:

  • Currency fluctuations and trade barriers as the top threat (27.7%)
  • Rising operational costs (24.4%)
  • Talent acquisition and retention challenges (21.2%)

While for IT and Telecoms:

  • Rising operational costs and Brexit and the uncertain economy (43.2%)
  • Cybersecurity threats and data breeches (40.35)
  • Increased competition from larger, global firms and the pandemic/health crisis (32.8%)

Arts and culture found:

  • Those rising operational costs (48.3%)
  • The impact of Brexit and economic uncertainty (38.7%)
  • Employee mental health and the pandemic/health crisis (29.3%)

Leading on from mental health, 1 in 7 small businesses see mental health as the most prevalent threat to their business.

Where are small businesses most vulnerable to threats

Vulnerability is not only determined by industry, but also by location. Our 2024 research reveals that small businesses in Cardiff, Glasgow and Birmingham are the most vulnerable to threats.

In 2022, Birmingham and Brighton were both tied at 33.3% and the most vulnerable to threats, followed by Cardiff (25%) as the third most vulnerable location for small businesses in the UK.

Cardiff now takes the top spot in the UK at 50% risk of closure this year, Glasgow is 31.2% at risk, and Birmingham 26.9%.

Looking into the top type of threats for Cardiff it’s the rising operational costs first (42.8%), followed by employee mental health and the combination of Brexit’s impact and economic uncertainty (35.1%).

What actions are small business owners taking to protect their businesses from threats?

Although over 78% of small business owners feel their business is at risk from any number of threats, only 27.8% have taken out liability insurance.

The main steps that the SMEs that were surveyed are currently taking to try and future proof their business are :a robust business plan first (39.4%), a revaluation of their budgets is the next action (28.2%), and then taking out public liability insurance in their third step.

Back in 2022 our survey found the most popular methods of protection to take was backing up data (30.4%), enrolling in an employee assistance programme (26%) and encrypting important information (26%).

Increased focus on financial planning appears to mirror the overarching threats linked to rising operational costs, Brexit and the current economy. Retaining customer loyalty also features as a top priority for SMEs with 29.6% focusing on this while they also prioritise reviewing their business plans and model - such as flexible working hours (27.7%) to fit their customers’ needs.

What are SME owners sacrificing for their business?

Owning a small business comes with huge responsibilities that fall on the individuals and without the back-up or protection that large entities and corporations have. Failure comes at a high price, and because of this small business owners pour a lot of time, effort and money into keeping their business afloat. And the impact? Other areas of their life suffer and take a backseat over their business.

In 2024, we asked SME owners what they were giving up to see their business succeed: 42% answered skipping travel plans, 40% pause their hobbies and physical wellbeing follows at 27.8%.

Encouragingly, business owners are thinking about their mental health more in 2024 with 25.2% agreeing this suffers – the 2022 results saw 30.8% deprioritise this first, followed by hobbies then physical wellbeing.

And what motivates them to keep going?

Dedication is clearly needed to make a small business thrive and survive, but what are the key motivations that keep founders and owners going through the tough times?

The top answer is – passion, for their business and their industry with 42.2% of owners feeling this way. The ability to call the shots over their work and enjoy the flexibility of having their own business was the second most popular answer (38.4%), and their customers’ support and positive interactions (36.2%) with their business was the third most popular reason to keep trading.

Final thoughts and recommendations

Change and prevention seem to be the key themes our 2024 survey has revealed. And while the stakes might be high, SMEs owners in the UK know a thing or two about reliance and pivoting years on from the aftermath of the COVID-19 pandemic.

Changes in government, customer trends and what owners are willing to sacrifice show us that protecting your business has never been more central to success. The UK itself has shifted in terms threats, demands and the ever-rising operational costs it takes to run a small business in these post Brexit and uncertain economic times.

The cost-of-living crisis - seemly linked back to lockdown and the hardships felt nation-wide are also at the forefront of loss of revenue and declining customer base.

But business owners are taking positive action to project their businesses in 2024. Carefully considering their business plans, retaining their staff and their reputation as they navigate through uncertain times.

And although some of the top threats to small businesses may seem beyond control, what owners can control is how well they prepare or react to such eventualities.

Taking out a small business insurance and or public liability plan offers protection in the face of major events and shifts on UK businesses, as well as those smaller but no less detrimental, everyday threats.

Methodology & sources

Towergate Insurance conducted a study exploring what threats small businesses in the UK are facing and the subsequent impact of these threats. 500 small business owners across the UK above the age of 18 were included in the survey which took place in September 2024 and was ran by Censuswide. The results provide a regional sector-specific breakdown of the most prevalent and detrimental threats faced by small businesses.

¹Small businesses must be 50-250 employees with an annual turnover of above €2million but below €10million: https://www.towergateinsurance.co.uk/business-insurance/finding-a-standard-definition-for-small-businesses.