Entrepreneurship in 2025: Unlocking Growth and Backing UK SMEs
The UK is a nation of entrepreneurs. And Global Entrepreneur’s Day – 21st August – arrives at a moment of renewed confidence in the UK’s business landscape.
Small and medium-sized enterprises (SMEs) account for 99.8% of the business population – over 5.5 million firms – according to the UK government’s SME Taskforce. Together, they employ around 60% of the workforce and generate £2.8 trillion in turnover. They are as diverse as the communities they serve: tech founders in Manchester, high street retailers in Cardiff, specialist manufacturers in Glasgow, and family-run service firms in every town across the country.
A steady stream of new businesses are registered every day. With incorporation costs remaining low (as little as £50 online at Companies House), the barriers to entry are minimal, fuelling a dynamic marketplace that constantly attracts both investors and acquirers.
While the appetite to start a business is strong, scaling a company has historically proved more challenging. Access to finance, limited adoption of digital tools, and the ever-present drag of late payments have long held SMEs back. However, the landscape is shifting.
Plus, over the summer, the UK secured landmark trade agreements with India, the United States, and the European Union. These deals open new markets for British businesses of all sizes, giving exporters and small firms greater certainty. For entrepreneurs eager to scale, this marks a turning point: these trade deals could spell sustained growth for the economy as a whole, supporting SMEs.
Alongside these trade deals are government policies – some as recently enacted as last month – that have been designed to support growth in SMEs.
Digital Adoption: The Next Great Opportunity
Technology remains one of the biggest levers for productivity growth among SMEs. The Enterprise Research Centre has shown that adopting a single new technology can improve productivity at the company level by between 7% and 18% (SME Taskforce). Yet the UK lags behind many of its G7 peers in digital adoption. Ranking only 25th worldwide for digital readiness, a recent British Chambers of Commerce survey found that 43% of SMEs had no plans to use artificial intelligence in their operations.
The barriers are often financial. Many small firms struggle to justify or secure the investment needed to digitise operations or adopt advanced technologies. The government’s SME Digital Adoption Taskforce has argued that overcoming this gap could unlock £94 billion a year in additional GDP from a modest 1% productivity increase. For entrepreneurs, bridging the digital divide will be as important as securing new markets or better finance.
Finance Landscape Shifting in the Right Direction
The Government in its launching of the ‘Small Business Plan to support SMEs across the country’, has announced a £3 billion expansion of the British Business Bank (BBB), raising its total guarantee capacity to £5 billion. This additional funding will strengthen the ENABLE programme, which provides government-backed guarantees to lenders. By reducing the risk for banks and financial institutions, the scheme allows them to extend more loans to smaller and newer businesses on improved terms, including lower interest rates. Alongside this funding increase to the BBB is the pledge to fund 69,000 Start-Up Loans for SMEs.
These measures come as Britain recorded the fastest economic growth in the G7 during the first quarter of 2025, creating scope for more potential fiscal easing, with the last interest rate decrease in August. Alongside this, the Government has extended 40% business rates relief for 250,000 firms until April 2026, shielding businesses from inflationary pressures, while more than 700,000 properties continue to pay no business rates at all.
Further support has been directed at smaller enterprises through the increase of the Employment Allowance to £10,500, protecting 865,000 firms from rises in National Insurance contributions.
Supported by government measures that help firms adopt new technologies, access business support services, and invest in future growth, private financial infrastructure momentum is building as well. According to UK Finance, lending by high street banks rose to £4.6 billion in Q1 of 2025, the sixth consecutive quarterly rise and the highest amount since mid-2022. This suggests lenders are regaining confidence in the SME sector, and entrepreneurs are once again seeking credit to fund investment and expansion.
Time to Pay Up: Tackling the Late Payment Culture
Amid these opportunities, one stubborn issue continues to drain the life from small businesses: late payments. Each day, 38 UK businesses cease operations permanently due to not being paid on time. The cumulative cost to the economy is £11 billion per year, but the human cost – burnt-out founders, strained suppliers, abandoned growth plans – is more difficult to measure.
These figures from the government rang enough alarm bells for it to finally tackle late payments to SMEs, entailing the penalising by hefty fines of those who routinely pay SMEs late, in the ‘Small Business Plan to support SMEs across the country’.
The plan is the most significant late payment reforms in a generation. The Small Business Commissioner will have new powers to impose fines running into millions of pounds against repeat offenders, while companies will face legal obligations to scrutinise payment practices at the board level. Maximum payment terms will be set at 60 days, reducing to 45, and mandatory interest charges for late payments will be enforced.
For entrepreneurs, this is more than a policy shift. It is a cultural reset. The message from government is clear: small businesses deserve to be paid fairly and promptly. Combined with the finance and trade measures already announced, it has the potential to create a fairer, more supportive environment in which new ventures can grow.
Regional and Sectoral M&A Dynamics
Entrepreneurship and dealmaking in the UK continue to show strength well beyond London and the South East, with regional markets demonstrating resilience and pockets of real growth. Experian MarketIQ data highlights that the mid-market remains steady across the country, with SMEs driving activity and accounting for almost 88% of all disclosed-value transactions in the first half of the year.
The Midlands delivered a solid performance, with deal values rising from £697 million to £769 million year-on-year. This modest but encouraging growth underlines the region’s ability to sustain momentum in its mid-market segment. Similarly, the East of England proved resilient, recording 24 mid-market deals worth £865 million, in line with last year’s 26 deals at £753 million.
Scotland continued to see strong activity at the smaller end of the market, with smaller transactions forming the bulk of deals, reflecting the region’s entrepreneurial depth.
Northern Ireland has emerged as a particular bright spot. Venture capital investment is increasingly targeting early-stage businesses in manufacturing and the professional, scientific, and technical sectors. This trend shows growing confidence in ambitious firms outside the traditional financial centres and signals a positive shift towards backing innovation and growth across the UK’s regions.
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In the South East, smaller transactions in the £500k to £10m range continue to provide a solid foundation for overall activity. While the volume of deals was lower than last year (62 compared with 104), mid-market activity remained steady, with 59 deals in H1 2025 compared with 56 in the same period of 2024.
Taken together, these figures demonstrate a healthy appetite for investment across the UK. With SMEs leading the charge and venture capital flowing into diverse sectors, the UK’s M&A landscape shows both resilience and opportunities for growth well beyond the capital.
A Moment of Promise, if Challenges are Met
The UK’s entrepreneurial ecosystem is entering a critical phase. On the one hand, trade deals, improved lending conditions, and new financial support packages offer a platform for growth. On the other hand, barriers such as digital underinvestment and global uncertainty pose challenges.
Still, there is reason for optimism. SMEs with the right backing could forge a growth trajectory. Policymakers, lenders, and large corporates all have a role to play in ensuring that entrepreneurs are not only celebrated on days like today, but supported every day with the practical conditions they need to thrive.
Entrepreneur’s Day is not just about recognising those who take the leap to start something new. It is about recognising the environment they operate in, and making sure it works for them, not against. With reforms to payments, access to finance, and digital adoption, the UK has the chance to build an economy where entrepreneurs can do what they do best: innovate, employ, and grow.
