How and why the UK's small businesses have thrived since the pandemic

Telegraph

30-04-2025

Resilient, adaptable and optimistic – the UK's small businesses have responded to economic upheaval with verve and tenacity, new research from Funding Circle shows, with the majority anticipating further growth this year. Successfully navigating Covid five years ago has given them the tools and ability to adapt to any challenge, especially with the spectre of tariffs looming.
Just ask award-winning chef and restaurateur Alexis Gauthier, who has emerged with a thriving brand five years after lockdown threatened his livelihood. As the UK battened down the hatches in 2020, his restaurant Gauthier Soho shut its doors, unable to pay its staff while they were on furlough.
But with the dynamism typical among the UK's 5.5 million small and medium enterprises (SMEs), the French chef switched to offering cook-at-home boxes, selling upwards of 500 a week at one time, allowing him to keep the entire team employed. This stronger presence has allowed Gauthier, who first created a forward-thinking plant-based menu in 1997 and has been a vegan since 2016, to switch his restaurants over to entirely plant-based products and he's since opened a new London venue, Studio Gauthier.
Since the pandemic, more than six in 10 (64 per cent) SMEs have made significant changes to their strategies. Nearly six in 10 (58 per cent) reported being better prepared to navigate economic headwinds thanks to their pandemic experiences. A similar number feel better equipped to handle uncertainty, while nearly half feel able to weather the higher cost of living.
An overwhelming nine in 10 (92 per cent) have continued with the new way of doing business, new research released this year by Funding Circle reveals. Most transformations have become long-term pivots as online retail has boomed and old business models have grown out of date.
'Five years on from lockdown, SME Britain has fundamentally changed,' says Lisa Jacobs, chief executive at Funding Circle. 'Short-term adaptations have become permanent, creating profitable shifts while technology now plays a more integral part in SMEs' businesses. These adaptations and resilience position them well to navigate ongoing macroeconomic challenges.'
Many businesses (63 per cent) have changed how they run and plan their operation with nearly half (47 per cent) saying they're more likely to adopt new technology, and nearly four in ten are confident in taking difficult business decisions.
Innovation drives success
What does today's business landscape look like? Some 42 per cent of changes businesses made in response to the pandemic include adopting new technologies, while just over a third (36 per cent) involve launching new products or services, and 30 per cent involve finding new customers. This nimbleness is testament to the resourcefulness of British businesses, while the long-term value of these changes has become clear, with most of the adaptations becoming permanent.
'The digital-first mindset that emerged during Covid is now a permanent feature of SME strategy, positioning them for long-term success,' says Jacobs.
And new approaches have borne fruit. Former wedding cake designer Anna Tyler and her fiancé Felix Harkness have more than doubled their turnover from 2020 to 2023 and hired another 10 staff after deciding to expand Anna Cake Couture, their Bristol cake shop and café business, to take online orders. Today the couple sell luxury cookies, macarons and more nationwide, and with the help of a Funding Circle loan, they have expanded their kitchen and premises.
For business owner Vik Gubskis, who owns café and wine bar 8 Rocks Deli & Wine in Loughton, Essex, switching swiftly to online-ordered home delivery at the onset of lockdown not only kept the business going but prepared it for the future. 'We have new revenue streams and have grown our team since the pandemic,' he says. 'The lessons we learned have enabled us to adapt our approach to managing finances, meaning we are now more able to plan ahead and negotiate better deals with suppliers.'
A cause for optimism
Despite the current economic turbulence, owners are largely bullish about growth. The research found that two-thirds (65 per cent) of small businesses expect to grow in the year ahead, while nearly half (43 per cent) are more confident about the coming year compared to the last. Technology is playing a key role in driving growth, with nearly half (47 per cent) most likely to focus on digital expansion, compared to 31 per cent looking at physical growth.
In the years since the pandemic, there has been a shakedown in business finance, with nearly half of owners (48 per cent) saying their finance needs have changed. Three-quarters (74 per cent) say they now have more appetite for short-term finance and are keeping reserves aside in case of cash flow squeezes and unforeseen expenses, while six in ten (61 per cent) say they have a greater need for business loans.
National reach, local impact
In all, direct finance from Funding Circle last year contributed £7.2 billion to the GDP and created more than 87,000 jobs with thousands more created by indirect investment. What's more, in 2024, lending through Funding Circle supported SMEs in all 650 UK parliamentary constituencies. The total average lent per constituency was £2.1 million.
'Small businesses are the backbone of the UK economy, and we provide the fuel to power SMEs up and down the country,' says Jacobs. 'This research highlights their enduring resilience, entrepreneurialism and determination to succeed.'
Funding Circle, business finance that backs you
Funding Circle knows that business owners thrive with the right backing. Since 2010, the UKs leading online platform for business finance has backed more than 110,000 UK small businesses with £14.6 billion in lending – and counting.