SME warning lights flashing over corporate stress indicators increasing

Daniel Bevan - Editor

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Warning signs are flashing for UK small and medium-sized enterprises (SMEs) as rising costs, late payments and supply chain concerns weigh heavily on business confidence, according to new data from ACCA and the Institute of Management Accountants.

The latest Global Economic Conditions Survey (GECS) shows SME confidence remains close to record lows, underlining the fragile state of the sector despite early indications of a potential recovery.

The survey, conducted during the early stages of the Iran conflict, highlights growing financial strain across UK businesses.

One of the most pressing issues is late payment, with the proportion of firms reporting difficulties in getting paid on time reaching its highest level in nearly 14 years.

The last comparable peak came in late 2012, when businesses were contending with the fallout from the eurozone crisis.

At the same time, concerns over supplier stability are approaching levels last seen during the пандемic, while fears about customers going out of business are also rising, though still below their 2020 peak.

Adding to the pressure, almost 80% of SMEs report continued increases in operating costs, leaving many struggling to remain viable.

The findings show little improvement in overall sentiment, with SME confidence in Q1 2026 largely unchanged from the near-record lows recorded in Q4 2024 following Chancellor Rachel Reeves’ first Budget.

There are, however, tentative signs of improvement. A rise in the survey’s New Orders Index suggests some recovery may be emerging in the UK economy.

But analysts caution that this optimism could be short-lived, particularly given ongoing geopolitical uncertainty and the potential for sustained high energy prices linked to tensions in the Middle East.

Lloyd Powell, head of ACCA Cymru/Wales, said: “Businesses are facing a difficult trading environment, with global tensions over the Middle East and inflation making for challenging trading conditions in the coming months.

“This quarter’s sharp rise in concerns about supply chain reliability and the ability to secure prompt payment demonstrate the need for the government to boost confidence and swiftly provide the implementation road map for their recently announced late payment new powers for the Small Business Commissioner.”

Jonathan Ashworth, Chief Economist at ACCA, said: “The global economy was in relatively decent shape before recent developments in the Middle East, amid the ongoing global AI boom, favourable global financial conditions and fiscal easing in a number of major economies.

“Nevertheless, the longer energy and other commodity prices remain high and uncertainty elevated, the greater the downside risks for global and UK growth.

“Before recent events, additional rate cuts from the Bank of England looked set to provide a helping hand for UK businesses this year, but that now looks unlikely. The risk is more likely in the direction of a rate hike.”