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Flagstone found that 43% of UK small and medium-sized businesses fear they cannot continue operating in their current form for more than two years. Its survey of 1,000 firms also found that 11% have considered closing altogether.
The findings point to mounting strain across the UK's smaller business base. Fewer than a quarter of respondents said they could withstand current financial pressures indefinitely.
Energy costs were the biggest financial concern, with 37% of businesses ranking them among their top three challenges. Economic uncertainty followed at 30%, ahead of labour costs at 28%, high operating costs at 26%, and the cost of materials and stock at 25%.
When asked how long they could continue operating as they do today if pressures remain unchanged, 15% of business leaders said up to one year. Another 29% said one to two years, and a further 29% said two years or more. Only 23% said they could continue indefinitely on the current basis.
Calls for government action focused on tax and energy. Some 43% of SMEs wanted a reduced tax burden, while 30% called for help with energy costs.
Closures rise
The survey was published alongside Office for National Statistics figures showing that almost 77,000 UK limited companies were deregistered between April and June. That was 2% higher than in the same period a year earlier.
London and the South East accounted for 27,000 of those closures, or 35% of the UK total. Those two regions also recorded some of the bleakest sentiment in the survey.
In the South East, 50% of businesses said they could carry on as they are for no more than another two years if current pressures persist. In London, the figure was 46%. Some 15% of firms in the capital said they had considered closing altogether, the highest share recorded in the survey.
Elsewhere, 44% of businesses in the North East said they feared they would need to change their operations within two years if conditions do not improve. Official figures showed 2,235 North East businesses closed between April and June, the region's highest number of closures for three years.
In the North West, 8,015 companies closed over the same period, up 4% year on year and double the national rate of increase. Even so, the survey suggested firms there were more resilient than the UK average, with 10% saying they could continue for only up to a year, compared with a national average of 15%.
In the West Midlands, 6,170 companies closed between April and June, representing 8% of the UK total. Some 45% of businesses in the region said they did not expect to carry on in their current form for more than two years without changes.
The East Midlands recorded a slightly lower share of businesses worried about continuing beyond two years, at 42%. However, one in five firms in the region said they had considered closing altogether, the highest proportion outside London.
Regional picture
Scotland showed a similarly downbeat outlook, with 48% of SMEs saying they expected to have to make changes within two years. By contrast, businesses in Wales and Northern Ireland were more optimistic. Some 35% of Welsh firms and 27% of Northern Irish firms said they would need to make changes within that timeframe to remain in business.
The survey was based on responses from senior decision-makers at 1,000 UK SMEs. It adds to broader evidence of pressure on smaller companies as they contend with higher bills, labour costs, and weaker confidence.
"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 of not just these businesses but also the people who work for them are front of mind in the Budget," said Katie Horne, Savings Expert at Flagstone.