Authored by Jonathan Cooper, Founder & Director of The Director’s Helpline and The Director’s Choice.

The Context

Last month, the Office for National Statistics (ONS) released its first quarterly estimate of GDP for 2025. The headline was encouraging: a modest return to growth after a prolonged period of economic stagnation. It was the kind of news many had been hoping for.

However, beneath the surface, the picture is much more complex.

ING analysts have identified two main drivers behind the positive Q1 data. First, there may have been a surge in production early in the year due to uncertainty around UK–US trade relations. Secondly, a recurring trend since 2022 shows stronger GDP performance in the first half of the year. And despite the upbeat tone, GDP growth in Q1 2025 is actually weaker than it was during the same period last year.

So, while the top-line figures may offer some optimism, the broader context surrounding early 2025 suggests a need for caution.

Adding to the complexity is the constantly evolving geopolitical backdrop. In early April, the US government announced sweeping trade tariffs, including a 10% levy on all UK imports – only to suspend them for 90 days. Not long after, the UK secured major trade agreements – first with the US, and then in May, a landmark deal with the EU, the first since Brexit.

None of these significant developments are reflected in the Q1 data, which was published on May 15. By then, the UK’s economic landscape had already shifted considerably.

The Reality for SME Business Owners

These GDP figures deserve even more scrutiny when viewed from the perspective of small and medium-sized enterprises (SMEs) – the backbone of the UK economy.

At The Director’s Helpline – which provides free, impartial guidance to UK directors – we hear from hundreds of SME owners each week. Their stories paint a far more challenging picture than the headlines suggest.

The broader economic data often overlooks the everyday pressures SMEs face. These businesses are particularly vulnerable to shifts in the political and economic environment – such as the recent rise in employers’ National Insurance Contributions (NIC). That increase has squeezed the margins of already strained firms, a concern we hear repeatedly from directors.

On top of the NIC increase, the National Living Wage rose 6.7%, an additional £1,400 per year for a full-time worker aged 21 or over – adding further payroll expenses for businesses.

These changes place extra pressure on all SMEs, but especially on industries that depend on casual staff or part-time workers, such as hospitality, retail, and leisure. Businesses in these sectors may need to reassess not only their staffing strategies but also their pricing models.

We frequently hear from business directors struggling with the growing complexity of today’s business environment. And recent surveys mirror what we’re seeing on the ground.

According to the Institute of Chartered Accountants in England and Wales, in April, business sentiment turned negative for the first time in two years. Meanwhile, GfK figures showed consumer confidence was at -20 in May, a three-point decline from this time last year.

The Federation of Small Businesses (FSB) Policy Chair Tina McKenzie, shared that “while figures are a tentative step in the right direction, this is still far from sustainable economic growth and certainly no cause for complacency.”

This need for greater awareness and support for UK SMEs was underscored by recent government figures showing that the number of payrolled employees has dropped by more than 100,000 over the past 12 months – a clear sign of a weakening workforce.

For many SME owners, the shadow of the pandemic still looms large too. As we near the five-year anniversary of the Bounce Back Loan Scheme, a significant number of businesses are still grappling with repayments.

Taken together, the past five years and ongoing geopolitical uncertainty serve as a stark reminder of the need for robust contingency planning and access to trusted advice.

It’s crucial to have open conversations – especially when financial pressures mount. Whether it’s dealing with creditor demands, HMRC arrears, or cashflow issues, there are always options. Reaching out early can make a real difference: preserving businesses, protecting jobs, and providing a clearer path forward.

While upbeat GDP headlines may suit the interests of politicians and policymakers, they don’t pay the bills or ease operational pressures. Despite the positive signals at macro level, many SMEs remain locked in a daily struggle to survive.