SMALL business owners face “drowning in a perfect storm of pressures” in 2026, they have warned.
In 2025, businesses were hit by National Insurance hikes, high interest rates for borrowing and stubborn inflation, hitting the spending power of potential customers.
The policies announced in the Budget in November will see more businesses turn to AI and ultimately replace humans with machines or choose to outsource to foreign companies rather than hire in the UK, they claim.
The recently-passed Employment Rights Act will see an additional 32,000 more dads per year able to access Paternity Leave immediately.
A new Bereaved Partner’s Paternity Leave will also be introduced from April, providing up to 52 weeks of leave for fathers and partners who lose their partner before their child’s first birthday.
Statutory Sick Pay (SSP) from day one and unfair dismissal rights moving to a 6-month qualifying period are also in the pipeline – while the minimum wage and living wage are also going up.
Newspage asked Small Medium Enterprise (SME) owners, and those who work closely with them, what their main worries are for 2026.
AI anxiety
Kate Allen, Owner at Kingsbridge-based Finest Stays, said AI is her biggest concern for 2026.
She continued: “My biggest concern this year is AI anxiety. As a founder, it’s hard not to worry about missing the bandwagon, but jumping too early is often more dangerous than waiting.
“I’m conscious of being left behind, but the real challenge is knowing what not to adopt, and where not to spend serious money.”
Number one issue is overwhelm
Colin Crooks MBE HonDsc, CEO at Intentionality said he is seeing business leaders struggling.
He added: “For the business leaders in every sector I work with, the number one issue is overwhelm. Owners are drowning in a perfect storm of pressures, all crashing down simultaneously.
“Recruitment challenges, cashflow squeezes, rising costs, new regulations, emerging technologies—there’s no shortage of important issues, but which to tackle first, and can any be delegated? Leaders can’t see a clear path through the noise. Right now, the ability to focus and prioritise isn’t just helpful—it’s the most essential skill for survival.”
Perfect storm
Tony Redondo, Founder at Newquay-based Cosmos Currency Exchange, agreed it was a “perfect storm” for small businesses.
He added: “My SME clients report that 2026 is a ‘perfect storm’ of overregulation and suppressed confidence. The Employment Rights Act has made the ‘cost of a bad hire’ skyrocket; with unfair dismissal rights now kicking in at six months, owners are paralysed by recruitment risk.
“Consequently, many are pivoting to overseas remote talent in South Africa or the Philippines. Simultaneously, removing Statutory Sick Pay (SSP) ‘waiting days’ has made illness a Day One financial hit that can wipe out monthly margins. Confidence is further eroded by the ‘de-banking’ crisis, where AI-driven compliance triggers freeze accounts without notice.
“On the fiscal front, frozen tax thresholds and ‘fiscal drag’ mean SMEs are being taxed on inflation rather than real growth, while Making Tax Digital (MTD) adds immediate administrative strain. With the UK market feeling saturated and over-regulated, many are now focusing their growth strategies almost entirely on overseas clients and international opportunities.”
Major source of anxiety
Astrid Davies, CEO at Astrid Davies Consulting Ltd, said many are choosing to sideline sustainability concerns.
She continued: “A major source of anxiety that I notice in clients right now is ‘the sustainability wobble’. They want to do the right thing. They want to be seen doing the right thing because it’s great for marketing that’s not greenwashing. Trouble is, they don’t know how to do the right thing.
“Or, worse, they feel that the global eye’s been taken off the sustainability ball and that means they could kick it into the long grass and no one will notice. I am encouraging clients with this anxiety to keep on keeping on.
“Doing the right thing well, the first time, will never go out of fashion. It is also a great way to avoid waste, to motivate and retain your talent, and to stand out in a noisy and currently pretty unforgiving marketplace. It is also a mark of their leadership calibre.”
Photo by César Couto on Unsplash.
