The Intermediary – March 2026 - Flipbook - Page 57
SPECIALIST FINANCE
Opinion
More resilient
than headlines
suggest
I
n recent years, economic
pessimism has become a selfdefeating national habit, and
it’s time we stopped indulging
it. Pragmatism is fundamental
to my approach as deputy
managing director of Paragon’s SME
lending division, but the endless
negative headlines just do not reflect
the resilience and resourcefulness I see
every day among UK small to medium
enterprises (SMEs).
Compared with other markets –
and I say this with confidence – we
have a business landscape to be proud
of. We’re a nation of entrepreneurs
and problem solvers, and more oen
than we acknowledge, when British
businesses act, other markets follow.
If businesses, policymakers and
lenders are serious about boosting
national growth, it is time we start
acknowledging – and backing –
that strength.
Our recent research of 1,000 UK
SME leaders reveals that 65% are
optimistic about their business
prospects over the next 12 months,
despite only 47% feeling positive about
the wider UK economy.
That gap maers. It shows that
those closest to the day-to-day reality
of British business believe in their
own capacity to grow, even when the
national narrative is bleak.
What’s more, in the face of
challenges outside of their control,
whether that’s trade tariffs or climate
change, more than a quarter (27%)
told us they are exploring new
markets, while 24% are investing in
staff training. We should recognise
these moves as confident investments
in competitiveness and long-term
sustainable growth.
This confidence is backed by wider
economic data. Office for National
Statistics (ONS) quarterly business
PHIL HUGHES
is deputy managing director
at Paragon SME Lending
demographic figures released in
January revealed business creation
activity picked up at the end of
2025, with more than 71,000 new
businesses launched between October
and December – a 10% increase
year-on-year. A notable rise in active
enterprises suggests improving
conditions for SMEs.
At the same time, UK production
and investment is also showing signs
of recovering health. ONS figures
show production output grew by 1.2%
in Q4 2025, with manufacturing and
energy both contributing.
Business investment is
strengthening, too – investment
levels are now 2% higher than
the same period a year earlier,
supported by increased spending
on ICT, machinery, equipment
and intellectual property products,
categories which are likely to lead to
future advances in productivity.
Investing in automation
Let’s not forget developments in
technology, with AI representing the
biggest advancement possibly since
the advent of the internet.
Analysts at PwC predict that AI will
add £2bn to UK GDP in 2026, with
contributions rising sharply in the
years that follow. With AI lowering
operating costs, improving decision
making and enhancing productivity,
the shrewdest SMEs stand to gain
the most.
This is backed up by our own data:
in a survey of 1,000 UK SME leaders
and decision-makers, we found
that more than 30% are investing in
automation technology such as AI.
Of those who are implementing AI,
36% report increased productivity,
31% beer data management and
30% cost reductions. Other benefits
include improved customer service
(27%), quicker innovation (27%) and
smarter procurement and inventory
management (24%). I believe this
technological shi could be a powerful
equaliser for smaller firms.
Economic analysts are recognising
the momentum behind British
business, too. Forecasters at Goldman
Sachs predict the UK economy will
grow 1.4% in 2026, up from around
1% last year, supported by moderating
inflation and stabilising labour
market conditions. Elsewhere, PwC
forecasts a similar growth rate of 1.2%,
placing the UK among the strongest
performing G7 economies.
These projections by credible
institutions maer, because they feed
business confidence. Investors follow
narrative as well as data.
When we portray the UK as sluggish
or broken, we make it easier for
investment to head elsewhere. If we
can get more comfortable recognising
and championing the areas where
the UK is performing well, I’ve no
doubt we will encourage investment,
ambition and hiring.
No one is denying that the operating
landscape for businesses is tough right
now, but this isn’t a challenge unique
to Britain, and there are reassuring
signs of activity moving in the right
direction. The UK has always been
a hub for innovation, finance and
talent, and as the data shows, SMEs
continue to problem solve and adapt in
changing conditions.
SMEs are rebuilding confidence; it’s
time everyone else caught up. ●
March 2026 | The Intermediary
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