As SMEs navigate an increasingly complex business landscape in 2025, rising operational costs, talent retention, and cyber threats continue to dominate boardroom discussions. However, a recent survey conducted by Towergate Insurance reveals that the biggest concern for small and medium-sized enterprises this year is the increase in National Insurance contributions—a change with far-reaching financial and operational consequences.
National Insurance Increase: A Pressing Financial Burden
The nationwide survey, aimed at identifying the key challenges facing SMEs in 2025, uncovered the following:
- 54% of respondents cited the rise in National Insurance contributions as their primary concern.
- 25% highlighted the increasing threat of cyberattacks and the need for stronger cybersecurity infrastructure.
- 20% pointed to ongoing difficulties in recruitment and retention, particularly in attracting skilled talent.
- 1% mentioned broader economic pressures, including inflation and supply chain disruption.
With more than half of respondents identifying the National Insurance hike as their top concern, the message is clear: this increase is placing intense pressure on businesses already facing a fragile economic environment. Higher employer contributions are raising payroll costs, forcing SMES to reconsider hiring plans, salary reviews, and even the security of existing roles.
Beyond the Balance Sheet: The Human Impact
The repercussions extend beyond financial statements. As employers absorb higher NI costs, employees may experience fewer pay rises, limited benefits, and slower recruitment cycles—all of which affect morale and retention. For SMEs competing with larger firms for talent, this shift could widen the gap in employer attractiveness.
Furthermore, 2025’s recruitment challenges—highlighted by 1 in 5 survey participants—underscore the urgency of building resilient, appealing workplaces despite cost constraints. Combined with the rising threat of cybercrime, which a quarter of respondents identified as a growing risk, SMEs are facing a perfect storm of external and internal pressures.
Richard Tuplin, CEO of Towergate Insurance, Comments:
“As a business, we understand the challenges that businesses of all shapes and sizes are facing, which were confirmed by responders in this survey. We understand that unexpected increased costs such as we saw with NI can create temptation to cut costs elsewhere and take risks you otherwise wouldn’t. As SMEs continue to grapple with these financial challenges, exploring solutions like salary sacrifice schemes and seeking professional advice can help businesses mitigate costs while still supporting their employees.”
