It has been a challenging 2024 for all businesses. Rising costs, supply chain issues, a talent shortage and regulatory changes have all brought new problems to contend with for SME owners. But what will this new year bring?
Changes were already afoot at the end of 2024 with some larger businesses calling their staff back to the office. Yet at the same time, research has shown that people want hybrid working and don’t want to be in the office full time. If employers want their staff back in the office, how can they make it an attractive place to be? There needs to be a reason for staff to be back in the office such as collaboration, otherwise it is hard to justify the demand.
Cybersecurity continues to be an issue for SMEs, with many perhaps wrongly thinking they won’t be targeted due to their size. SME bosses need to make sure they have plans in place to deal with and prevent cyberthreats. AI adds to this challenge but can also provide a solution too.
Cost pressures continue to loom large for SMEs, as although inflation is coming down, it has not always resulted in changes in supply chain prices. Energy bills still provide headaches for SMEs and an increase in wages is also something to consider. On the following three pages, three experts discuss what they see as the major challenges and areas of growth for SMEs.
Simon Daniels, Sales Director, KBS Corporate, said: “The new UK legislation will dramatically affect how SMEs do business in 2025. The Employment Rights Bill and sections of the Digital Markets, Competition and Consumers Act mean businesses will have to move fast to become compliant. While these moves are meant to protect workers and consumers, they might raise administrative and operational costs. The stricter penalties for non-compliance go up to heavy fines, raising the bar on ensuring SMEs are regulatory-ready.”
While Bernd Dombrowsky, VP Sales & Marketing EMEA, Kingston Technology Europe, said: “Artificial Intelligence is widely understood to offer multiple benefits to businesses and would seem to be an opportunity, but the reality is that for SMEs, adoption of AI can depend on the sector they work in and whether they have the available budget and appetite to embark on the AI journey. A survey carried out by the British Chambers of Commerce in the summer found that 43% of SME firms had no plans to use AI technology at all, but this is despite 42% saying they believe AI will increase their productivity.”
Ralph Berndt, Director Sales and Marketing, inq. South Africa, added: “Digital Transformation has reshaped customer behaviour. SMEs must now provide seamless, secure and personalised experiences to remain competitive. Achieving this requires not only the right technology but also reliable connectivity solutions that support hybrid environments and secure data flows.”
Simon Daniels, Sales Director, KBS Corporate:
The economic backdrop as we enter 2025, formulated by global pressures and policy developments, presents several headaches for management teams due to rising operational costs. Inflation is projected to stabilise but will have a long-term effect on profitability.
Notably, SME insolvencies have risen, which tend to show their vulnerability during periods of economic uncertainty. Such pressures highlight the importance of strategic planning for business resilience in the changing market.
The impact of regulatory changes
The new UK legislation will dramatically affect how SMEs do business in 2025. The Employment Rights Bill and sections of the Digital Markets, Competition and Consumers Act mean businesses will have to move fast to become compliant. While these moves are meant to protect workers and consumers, they might raise administrative and operational costs. The stricter penalties for non-compliance go up to heavy fines, raising the bar on ensuring SMEs are regulatory-ready.
Meanwhile, cybersecurity threats are still highly relevant: in 2024, 50% of the businesses in the UK reported a cybersecurity breach within the last year, underlining the crucial need for investment in digital protection
Opportunities for growth
Business owners breathed a sigh of relief following the Autumn Budget in the UK as gloomy predictions about sizeable hikes in the Capital Gains Tax rates proved to be far worse than what was ultimately announced by the Chancellor of the Exchequer, Rachel Reeves.
Tax incentives for research and development, alongside government support for high-growth sectors like technology and renewable energy, create the groundwork for innovation and expansion.
Harnessing technology for competitive advantage
Technology remains one of the major determinants in the performance of SMEs. Firms embracing digitisation tend to fare better than their contemporaries by using innovation to leverage their operations and customer engagement. The UK’s leadership in Artificial Intelligence and green energy opens up modern markets for the SMEs. In embracing this technologically changing environment, SMEs become more resilient and competitive.
The role of mergers and acquisitions
While trade challenges remain very much in place under Brexit, undervaluation has presented unique opportunities within the UK mergers and acquisitions space. Experts predict increased activity as market confidence grows and stability returns. This presents an unrivalled opportunity for SMEs to scale operations, secure investment or seek out exit strategies.
Resilience and innovation for the future
The second half of the 2020s will hopefully be far less eventful globally than the first. That prospect can only help the economy – and, by consequence, company owners intending to capitalise on the work they have put into building up their businesses.
SMEs, which account for 99.9% of UK businesses and employ over 16.7 million people, are the backbone of the economy. By embracing innovation, adapting to regulatory shifts and capitalising on available support, SMEs can navigate the challenges of 2025 while seizing the opportunities ahead.
Bernd Dombrowsky, VP Sales & Marketing EMEA, Kingston Technology Europe:
Companies of all sizes are grappling with economic challenges. Inflation rates, higher energy costs, global conflicts and unstable political environments are leading to uncertainty, and SMEs are not an exception. But amongst all this there are opportunities for SMEs to grow and to use new innovations and new approaches to expand their businesses.
Artificial Intelligence is widely understood to offer multiple benefits to businesses and would seem to be an opportunity, but the reality is that for SMEs, adoption of AI can depend on the sector they work in and whether they have the available budget and appetite to embark on the AI journey. A survey carried out by the British Chambers of Commerce in the summer found that 43% of SME firms had no plans to use AI technology at all, but this is despite 42% saying they believe AI will increase their productivity.
The challenge for SMEs is understanding how AI can work for them. We hear a lot about the investments being made in AI and in data centres that are dedicated to powering AI implementations, but most companies don’t require the scale of Meta or AWS, for example. Instead, they can benefit from affordable, scalable solutions tailored to their specific needs, particularly if they aim to run data-intensive applications like Large Language Models (LLMs). Memory and storage solutions, including SSDs, offers SMEs a way to handle these data demands on traditional servers, allowing them to retain data security by hosting on-premises, rather than relying on the cloud.
This is where technology integrators and Value Added resellers have an opportunity. Their expertise will be invaluable in helping SMEs to understand what infrastructure they need to adopt AI successfully in the year to come. They have access to competitively priced components such as memory and storage that are essential as AI usage grows and they will help firms to navigate a path that allows them to take advantage of AI and scale as they grow.
Another opportunity for SMEs is to start building security by design, particularly if they operate in the EU and are now subject to NIS2 and DORA regulations. Security by design means that all aspects of the SME business are seen through a security lens. IT departments can plan encryption, such as on SSDs or on external USBs, to ensure all data is protected whether it’s being used within the corporate perimeter or by employees working remotely. Again, IT integrators can help SMEs to adopt an enhanced security approach that will ensure they not only protect sensitive data but are also compliant. The new regulations have made senior executives more responsible, which means they will be looking for expert assistance.
Ralph Berndt, Director Sales and Marketing, inq. South Africa:
SMEs are the backbone of South Africa’s economy. However, their resilience and adaptability will continue to be tested in the coming year. The primary challenges will be for these small businesses to effectively navigate an increasingly digital landscape, strengthen their cybersecurity and manage resource constraints. With these challenges also come growth opportunities for those who look to embrace innovation.
Below, are some of the challenges to look out for.
1. Cybersecurity vulnerabilities
As SMEs adopt digital tools to improve efficiency, their exposure to cyberthreats increases. Many lack the resources or expertise to implement comprehensive security measures, leaving them vulnerable to phishing, ransomware and domain spoofing attacks. Technologies such as multi-factor authentication (MFA), Endpoint Detection and Response (EDR) and email protection solutions like DMARC are essential but often perceived as cost-prohibitive. At inq., we provide solutions that deliver managed cybersecurity services tailored to SMEs.
2. Resource constraints
Limited budgets and a shortage of skilled IT professionals make it challenging for SMEs to adopt advanced technologies. Solutions like cloud migration, which offer scalability and cost-efficiency, can appear daunting due to upfront costs and perceived complexity. Our cloud solutions, including hybrid models, are designed to help SMEs.
3. Evolving customer expectations
Digital Transformation has reshaped customer behaviour. SMEs must now provide seamless, secure and personalised experiences to remain competitive. Achieving this requires not only the right technology but also reliable connectivity solutions that support hybrid environments and secure data flows. For instance, inq.’s software-defined wide-area networks (SD-WAN) provide SMEs with the secure, high-performance connectivity required to meet these expectations.
The growth opportunities to consider include:
1. Digital Transformation
Digital tools, particularly cloud computing, will empower SMEs to streamline operations, improve customer engagement and enhance scalability. Hybrid cloud environments, which combine the security of private clouds with the scalability of public clouds, offer an ideal pathway for SMEs to modernise their infrastructure without overhauling legacy systems.
2. Intelligent connectivity
Emerging connectivity solutions, such as SD-WAN and private networks, are enablers for SMEs looking to optimise and support remote or hybrid workforces. These technologies ensure secure, high-performance data transit across multiple locations, unlocking new efficiencies and enhancing innovation.
3. Resilient cybersecurity strategies
The rise of outsourced Security Operations Centres (SOCs) and managed Extended Detection and Response (XDR) services offers SMEs a cost-effective way to enhance cybersecurity. By leveraging these tools, SMEs can address the skills gap and ensure round-the-clock threat monitoring without maintaining in-house teams.
4. AI and IoT integration
Adopting AI-powered tools and IoT devices will enable SMEs to optimise decision-making and operations. From predictive maintenance in manufacturing to real-time analytics in retail, these technologies open doors to improved productivity and customer insights. Our edge computing solutions facilitate smooth AI and IoT integrations, ensuring SMEs can harness these technologies to their full potential.
