Only 6% of SMEs feel ready for growth, grenke finds

UK SMEs are increasingly prioritising short-term resilience over long-term growth, with new research from grenke suggesting many businesses are operating in what it describes as a “Seven-Month Economy”.

The funding provider’s Renewed Lease of Life 2026 report, based on a survey of 500 SME decision-makers, found that only 6% of businesses currently feel confident and ready to grow, while more than a third (37%) say they are struggling or under significant pressure.

The findings mark a sharp change in sentiment since grenke’s 2024 survey, when 86% of SMEs said they wanted to thrive rather than simply survive.

According to the latest report, businesses are now planning major investment decisions just seven months ahead on average, while only 14% say they can confidently look beyond the next 12 months. Nearly three-quarters (74%) believe making the wrong long-term investment decision is riskier today than it was two years ago.

Energy costs remain the biggest challenge facing SMEs, cited by 76% of respondents, followed by reduced or unpredictable customer demand (66%), cashflow pressures (59%), regulatory burdens (58%) and access to finance (55%).

Cashflow constraints appear to be having a significant impact on growth plans. The report found that 85% of SMEs are experiencing cashflow pressure, while 42% have adopted cost-cutting as their primary strategy for navigating current conditions.

More than four in five businesses (83%) said financing or cashflow issues had caused at least one area of their business to stagnate over the past year. Hiring has been the most affected area, cited by 34% of respondents, followed by launching new products and services (23%), expanding into new markets (23%), marketing activity (23%) and staff training (22%).

The research also highlights the growing challenge of ageing equipment. Almost half (46%) of equipment used by SMEs is considered sub-optimal, contributing to higher operating costs, lower productivity and reduced employee engagement.

At the same time, businesses face increasing pressure to modernise. More than half (57%) say they are under pressure to upgrade equipment and technology, driven by competitors’ investments, sustainability requirements, rising customer expectations and the rapid pace of AI development. Indeed, 58% of respondents said artificial intelligence is directly accelerating the need for investment.

Despite recognising the need to modernise, many businesses remain hesitant. Nearly nine in 10 SMEs (89%) said they are more cautious about major investment decisions than they were 18 months ago, citing energy costs, cashflow uncertainty and wider cost volatility as key concerns.

The report also identified a disconnect between attitudes towards leasing and actual usage. While 90% of SMEs recognise benefits associated with leasing and 61% believe it could help unlock growth opportunities, adoption has fallen from 44% in 2024 to 38% in 2026.

Instead, businesses appear to be relying increasingly on shorter-term funding solutions. The proportion of SMEs choosing credit cards and overdrafts has increased, while demand for both leasing and business loans has declined.

“Businesses know what they need to do; what they need is the confidence, conditions and partners to make the next steps feel possible.”

He added: “Rather than waiting for the economy to improve, the real opportunity is to reduce decision risk, restore the conditions for confidence and help SMEs move from belief to action. This is how we’ll bring a renewed lease of life to the businesses that are the heartbeat of the UK economy.”