UK small and medium-sized enterprises (SMEs) continue to view the cost-of-living as their top business concern, though fewer now cite it compared to a year ago.
According to new data from Allianz UK, 54% of SMEs identified the cost-of-living as a leading risk in 2025 - a 7% decrease from the previous year.
The survey results point to shifting business conditions, with nearly half (45%) of SME respondents reporting an impact from changes in consumer demand over the past 12 months.
Variations in regional response also surfaced, with only 36% of London-based SMEs naming the cost-of-living a significant issue - down from 64% in 2024. In contrast, concern has grown in other areas, with 76% of respondents in Yorkshire & Humber and 72% in the South West citing it as a major risk.
Changes to legislation and regulation were named by 29% of respondents, placing second on the list. Trade tariffs (26%), cyber incidents (24%), and fiscal or tax constraints (20%) followed.
Regulatory changes appear to weigh more heavily on SMEs than on larger firms, with 38% saying their business had been affected by legislative developments during the past year.
When measured against the Allianz 2025 Risk Barometer, which tracks sentiment among larger businesses, some clear differences appear. For large firms, cyber incidents ranked first, while SMEs placed that risk fourth. Business interruption, listed second by larger companies, ranked ninth among SMEs. Political risks and new technologies also ranked higher for larger organisations than they did for smaller businesses.
Alex Ktenidis, director of digital & ALP at Allianz UK, said that while the public conversation often focuses on the consumer effects of the cost-of-living, the business consequences should not be overlooked. “But when consumers have less disposable income and spending slows, that can hit SMEs hard.”
Ktenidis said SMEs appear increasingly aware of the risks they face in today’s economy. He added that Allianz continues to assist business owners in managing disruptions and focusing on long-term recovery when challenges arise.
The findings indicate that SMEs are adjusting their risk priorities in response to changing conditions, with regulation, demand shifts, and digital threats drawing increased attention.
What risks do you think will matter most to SMEs in the coming year? Share your thoughts in the comments below.
