From cyber-attacks to tariff tensions, these are the biggest challenges facing UK businesses 

It’s no secret that life isn’t easy out there for UK businesses, nor does it look like conditions will improve in the coming months. So, what can SMEs expect: and what are the risks they should be planning for?  

I’ve looked at some of the biggest risks I see for UK businesses in 2025 and beyond. 

1. Growing geopolitical tensions

Business leaders only need to read the news to grasp the volatility of geopolitics.

Prime Minister, Keir Starmer, recently committed to increasing defence spend to 2.5% of GDP by 2027. This is the Government's recognition of a more unstable global environment. The Russia-Ukraine conflict continues to disrupt European trade routes and energy markets. 

Of course, the return of Donald Trump to the White House has introduced fresh uncertainty into international trade relations - and fresh fears of economic recession. Trump has introduced tariffs on a variety of imported goods, from a variety of regions.  

2. Economic headwinds 

The sluggish UK economy presents a key challenge to businesses. While inflation has moderated from earlier peaks, it remains persistently above the Bank of England's 2% target, limiting options for interest rate cuts that might otherwise boost activity.  

This continues to dampen business investment and consumer spending. Rising wage costs present a challenge for businesses across sectors, driven by both ongoing skills shortages and employees seeking compensation that keeps pace with the higher cost of living.  

3. April’s cost increases 

April brings a significant tax blow for many UK businesses. This is due to increases in both National insurance, and minimum wage requirements. These increases were announced in the Autumn budget.

Many companies have warned of closures, job losses and price increases as a result of rising costs linked to the Budget announcements. According to a report from the BBC, Poundland's owner has said it is considering putting the chain up for sale, as tax changes coming in April will add to pressures on the business. 

Yet, our own research adds some nuance. We found that most businesses are confident they can manage the additional costs from the Autumn Budget changes: 65% of businesses told us they were confident they could absorb costs from the Budget. Whilst just 30% of firms said they would make decisions based on increased costs from the Budget tax rises this year.  

4. Weak demand for metals 

Personally, I speak regularly to businesses in the metals sector and have witnessed that the broader economic challenges have significantly impacted them. After the Covid pandemic, prices and demand both rose sharply, however, the industry now faces flatlined demand and plummeting prices. Delays on construction projects continue to dampen demand, as developers wait for economic conditions to improve. 

Overcapacity has created a competitive environment where larger companies increasingly undercut smaller firms. Margins are being further squeezed by high interest rates on debtor-backed funding. 

Meanwhile, competitively priced raw material imports continue to drive domestic prices down. Despite all this, many buyers we talk with are reasonably optimistic. However, our view at Atradius is that significant demand increases are unlikely for now and the remainder of 2025 will show stagnant market and challenging conditions. 

5. Potential cyber attacks 

Many businesses are still underestimating the risk of being targeted by hackers and cyber criminals. This may be surprising, given that research shows almost half of businesses have been victim to a cyber-attack. 

Smaller companies are particularly at risk. According to a new report by the Association of Business Insurers (ABI), SMEs generally consider themselves too small to be targeted by cyber criminals and, as a result, are not using cyber insurance to help mitigate these risks. 

Firms across all sectors are vulnerable to cyber-attacks, but we believe there is a particular risk in the haulage industry. This is evident with the malicious publication of Owens Group’s internal data on the dark web in 2023.  

6. Supply chain issues, including issues with adverse weather 

UK business’ supply chains continue to be tested in 2025. This contributes to a concerning rise in insolvencies, particularly among SMEs with limited cash reserves to contend with extended periods of disruption. 

Severe weather conditions continue to take their toll too and have added to significant disruption to transportation networks and manufacturing facilities.

Forward-thinking organisations are responding by diversifying their supplier base and investing in more resilient logistics planning. Technology plays a big role in streamlining processes and improving efficiency. According to research by BDO, 47% of mid-sized companies are looking to integrate AI into their supply chain operations. 

7. Late payments 

Late payments are a major worry for UK businesses in 2025 - 63% of businesses are concerned about the impact of failed or late payments, according to our own Atradius research. 

The problem of late payments is amplified by rising interest rates, coupled with the burden of Covid-era loan repayments, which are squeezing business liquidity. This means businesses may defer payments to suppliers, creating a domino effect across supply chains and a potential cascade of business failures, particularly amongst SMEs.