The Outlook for SMES going in to 2024

sme team discussing 2024
As we approach the end of 2023, the recent Autumn Statement, presented by the Chancellor, assessed what the economy will face in 2024. The last few years have been tough for all businesses, but particularly SMEs, so how are they faring and what is their outlook as we head into 2024?

Policy Changes and Economic Outlook 

The fall in inflation to 4.6% in October is welcome, though its expected persistence is forecast to be mainly domestically driven. The uncertain, low growth forecast will also cause concern, especially in a relatively weak global environment and the fact that there will be an election next year.

There were several policy announcements, and the key ones that are most relevant to SMEs are:

National Insurance Contributions (NICs) are decreasing from 12% to 10% with changes to Class 2 and Class 4 NI.

100% expensing of capital allowances on qualifying new plant and machinery investments will be made permanent (though it is worth noting that most small businesses are already covered by the Annual Investment Allowance set at £1 million).

The National Living Wage (NLW) will see a 9.8% increase to £11.44, with the age threshold lowered from 23 to 21 years old.

The small business multiplier for business rates will remain frozen at its 2023/24 rate into 2024/25.

The current 75% business rates relief for eligible retail, hospitality and leisure properties has been extended for one year, covering 2024/25.

The Office of Budget Responsibility (OBR) estimates that business investment will be boosted by £14 billion, contributing to a further 78,000 people in employment.

Reaction on behalf of small businesses has been mixed.

Tina McKenzie, Policy Chair at the Federation of Small Businesses (FSB), said:
"Jeremy Hunt has today taken very welcome action on late payments, small businesses' rates, and self-employed taxation. Small businesses – and the 16 million people who work for them – are the route to future growth that will raise living standards across the whole country."

Louise Hellem, CBI Chief Economist, said:
"With many firms bracing for a significant hike in business rates next year, the Chancellor's focus on smoothing the edges for SMEs and targeted support for key sectors is understandable, but ultimately leaves a number of firms facing rising costs at a difficult moment in the economic cycle."

SMEs' Sentiments: The Ambition Index Report

So, how are SMEs thinking and feeling, and what are their primary concerns going into 2024?

The "Ambition Index" report, a comprehensive analysis of SME sentiment conducted by Three Business, reveals a remarkable story of resilience.

Despite facing unprecedented challenges over the past few years, including the pandemic, political uncertainties, and supply chain disruptions, SME leaders have demonstrated an incredible ability to adapt and persevere. A significant 65% of SME leaders now feel more confident in their business's future than they did during the peak of these challenges.

Optimism for 2024:
This report highlights the optimism that is widespread across the SME sector. Mike Tomlinson, Managing Director of Three Business, reflects this sentiment in his assessment of the report, "There is lots of data and evidence in here, but if there's one thing you take away from our report, it is this: UK SMEs are expecting a better year in 2024."

This optimism is not just a feeling; it's backed by data showing that 69% of SME leaders feel their business is resilient, and 70% are optimistic about their prospects for 2024.

The report provides a wealth of data underscoring this optimism. Notably, 67% of SMEs believe the experiences of the past three years have made their businesses more robust and capable of withstanding future shocks. Additionally, 70% feel their companies are well-structured and prepared to overcome any difficulties that 2024 might bring.

Strategies for Weathering Economic Shifts

SMEs have not just survived over the last few years; they have evolved. The report highlights that this has been challenging, with 73% of SMEs adapting their business to survive.

These adaptations include a 29% investment in technology, a 27% change in flexible work policies, and a 24% investment in marketing. These shifts highlight how resilient and nimble SMEs in the UK have become.

Addressing Burnout and Wellness:
However, these adaptations come with their challenges. The report touches upon the mental toll on SME leaders, with over half reporting feelings close to burnout.

This highlights the importance of balancing business growth with personal well-being. The report serves as a reminder that the health of a business is intrinsically linked to the wellness of its leaders.

So, what are their major concerns?

The top 5 causes of stress for business leaders and their teams are:
Cost of living crisis: 48%
Other financial pressures: 28%
Lack of government support for SMEs: 20%
Pressure to adapt to a new way of working: 19%
Big changes in the political landscape: 19%

'Burnout' is now a universally recognised term and is a phenomenon that business leaders, leading busy and pressured lives, can often fall victim to. Over half (52%) of SME leaders currently feel close to burnout, and 73% feel the uncertain environment of the last few years has intensified the risks and pressures of running a small business.

Looking Ahead to 2024

As SMEs focus on 2024, they do so with a strategic mindset, ready to unlock growth opportunities. The Ambition Index report reveals that 70% of SME leaders feel optimistic about the prospects for their business in the coming year.

This optimism is not unfounded; it's supported by plans for substantial investments in various areas, including recruitment, creativity, and expansion into new sectors. They expect to experience a 15% increase in revenue on average, which would boost overall SME turnover to £2.3 trillion next year.

Collectively, SMEs plan on investing in growth to the tune of £252 billion, with 70% saying that growth is a priority for next year.

Top 5 areas SMEs will invest in in 2024




Staff training & development


Customer Service


Improving facilities or tools



Challenges on the Horizon:
Despite this optimism, SMEs are acutely aware of the challenges ahead. Whilst small and medium businesses get lumped together, 57% of small businesses say that the challenges they face are different to those of medium or large businesses.

The biggest challenges, as identified by the report, include keeping a good work-life balance (36%), ensuring the company is growing and progressing (32%), addressing the cost of living effects on consumers (30%), managing high-interest rates (25%), and coping with the rising cost of doing business (25%). Navigating these challenges will require SMEs to be nimble, innovative, and strategic.

It is so exciting to see SMEs fired up for next year and ready to invest, grow and face anything thrown at them. Running a business has always required a huge amount of energy and agility, but recent years have truly tested leaders and shown that even the best-laid plans can be disrupted by outside pressures.

As we head into 2024, UK SMEs seem remarkably positive, given the difficult circumstances they have faced and the uncertain future. However, it is clear that they feel they need more financial support from the government (72%), but only 47% feel they are likely to get it.

As always, SMES need to continue to adapt to survive. Continuing with the digitalisation of their business, the upskilling of their employees, the exploration of new markets at home and abroad, and the focus on customers will help them meet their target of boosting growth and productivity.