One in three UK SMEs stuck in survival mode despite hard work
A new report from HR and payroll platform Employment Hero has found that one in three small businesses in the UK are operating in or near "survival mode" despite most SME leaders reporting improved productivity in the past year.
The report, titled "Work that Works", draws on survey responses from 2,500 business leaders and employees across the country and highlights a disconnect between how productivity is perceived and measured within small and medium enterprises (SMEs) and by employees themselves.
According to the report, 72% of SME leaders believe productivity in their business has increased over the last twelve months, with many attributing these perceived gains to the adoption of new technologies. However, this sense of increased workplace efficiency is not reflected in national data. The Office for National Statistics (ONS) has recorded the weakest productivity growth in over a decade throughout the UK. Employment Hero's research suggests this may be because, while SMEs are busier, these efforts are not translating into meaningful growth or long-term resilience for many firms.
One in three SMEs surveyed reported being in, or close to, 'survival mode,' limiting their ability to invest in innovation or growth. This is creating a situation where businesses are "doing more" operationally, but without achieving sustainable progress.
Employee perspective
The report also points to a divergence between how productivity is measured at a national level, where outputs-per-hour remain the benchmark, and the factors that actually drive productivity on the ground among employees.
For employees, the primary influence on productivity is not the number of hours worked or financial incentives, but job satisfaction. The survey found that employees who view their work as meaningful are three times more likely to feel committed to their organisation and twice as likely to say they are productive.
Despite these findings, job satisfaction ranks only seventh out of ten priorities for companies aiming to improve productivity. The report highlights a potential lack of awareness among employers of what constitutes a productive workforce.
The survey, conducted in partnership with QuestionPro, gathered data from 1,000 business leaders and 1,500 employees across a broad range of industries, geographical locations, and workplace settings, ensuring a representative sample.
Comments from Employment Hero
"There are 5.5 million SMEs powering the UK economy, and the vast majority of them are stuck in survival mode. This isn't just a warning sign, it's a crisis. The national conversation on productivity is missing the mark. SMEs are working harder than ever, but that effort isn't translating into growth. The data is clear, when people feel good about their work, productivity follows. Until we rethink what we value, we're not going to solve the productivity puzzle - and it's small businesses who will continue paying the price. Measuring productivity through the outdated 'output vs. input' lens no longer reflects the realities of modern work. In 2025, we must rethink how we define and measure productivity - and that starts by listening to the people on the ground."
Employment Hero UK Managing Director, Kevin Fitzgerald, delivered these comments alongside the release of the report, urging business leaders and policymakers to reconsider current approaches to assessing productivity. He argues that focusing on employee engagement and experience may be key to reversing stagnant productivity trends in the country.
The survey's findings indicate that while investment in technology and process improvements remains important, understanding and improving the workplace experience of employees could play a more significant role in driving sustainable productivity for SMEs.
The issue of how best to measure and promote productivity is likely to remain a focus for business groups and government, as policymakers seek solutions to the ongoing productivity challenge faced by UK small businesses.
