More than 40 per cent of UK small and medium-sized businesses polled in a new report have said that they fear they will be unable to continue operating in their current form beyond the next two years, amid mounting financial strain on UK SMEs.

The report from Flagstone surveyed 1,000 UK SMEs, finding that 43 per cent do not believe they can survive for more than two years in their current form, with 11 per cent saying they have considered closing altogether.

Less than a quarter of businesses polled in the report said that they would be able to indefinitely withstand current financial pressures. Energy costs were cited as the main financial concern, being ranked among the top three challenges by 37 per cent of businesses.

This was followed by economic uncertainty (included in the top three challenges by 30 per cent of respondents), labour costs (28 per cent), high operating costs (26 per cent) and the cost of materials and stock (25 per cent).

15 per cent of businesses said that they could only continue operating for up to one year if pressures remain unchanged, while 29 per cent said one to two years and a further 29 per cent said they could survive for two or more years. Just 23 per cent of businesses said they could continue indefinitely.

Regarding the kind of help SMEs would like to see from the government, most focused on issues of tax and energy, with 43 per cent wanting a reduced tax burden and 30 per cent calling for help with energy costs.

In order to gauge the impact these pressures are having on UK businesses and establish how real the threat of closure is, Flagstone analysed recent ONS data on business closures and launches.

Data showed that, from April to June 2026, close to 77,000 UK limited companies deregistered, an increase of 2 per cent compared to the same period from 2025.

Flagstone Savings Expert Katie Horne commented: “UK businesses are absorbing significant financial pressures, but there can come a point when the cost of keeping up outweighs the benefit of keeping going.”

“Whether they’re tackling energy costs, National Insurance, business rates, or costs associated with labour, supplies and operations, UK businesses are telling the government they need greater support and the data shows that many are at a tipping point.”

“The UK’s SME community employs 16.9 million people nationwide. UK PLC needs to rally now to ensure that the future health and prosperity not just of these businesses but of the people who work for them are front of mind in the Budget.”