Key Opportunities & Threats in the Current Economy for SME’s

As economic conditions shift across interest rates, trade, exchange rates and tariffs, UK SMEs face a unique mix of risks and rewards. Here's what you need to know to stay ahead.

The Bank of England has cut interest rates twice in 2025, most recently to 4.25% in May. Further cuts are expected later this year.

What it means for SMEs:

• Refinance now - If your business has loans or asset finance, shop around. Lower rates are making better deals available.
• Consider borrowing to grow - As rates fall, investing in new equipment, marketing or expansion becomes less costly.
• Watch your overheads - If you’re on a variable-rate loan, make sure you’ve budgeted for potential changes.

For more:

• Understand the current rate shift and what it means
• Use our interest rate impact calculator

Sterling (GBP) has regained strength this year, which helps reduce the cost of imported goods and materials. However, volatility remains a challenge.

• Impact on SMEs: Importers - Costs may ease slightly, but don’t expect major savings. Lock in good rates where possible using FX tools.
• Exporters - Your goods are more attractive overseas, but ensure you’re pricing correctly to protect margins.

Tip: Use FX forward contracts or multi-currency accounts to manage risk.

UK–US “Economic Prosperity” Agreement (In Progress)

• Lower tariffs on cars, steel and aluminium subject to caps.
• Positive for UK manufacturing, but quotas may favour larger exporters.

UK–EU Post-Brexit Reset

• Simpler rules for goods movement.
• Lower carbon compliance costs and easier customs for food and manufactured goods.

Other Deals

• India: FTA signed in May (boost for automotive, textiles, whisky).
• CPTPP: Fully ratified opens Asia-Pacific trade potential.

Tip: If you’re not exporting yet, consider starting small via online or partner-based routes in CPTPP or EU markets.

Common Pitfalls:

• Assuming all tariff reductions apply to you.
• Ignoring FX exposure one swing can erase profit.
• Not staying updated on new customs or regulatory changes.

Tools & Support You Can Use:

 
Strategic Opportunities for Growth

  
Middle East Conflict: Fuel Volatility & Inflation Risk

The recent conflict between Israel and Iran has driven up oil prices and injected fresh uncertainty into global markets. Brent crude surged over 10%, with energy and shipping costs set to rise.

Impact on SMEs:

• Transport & Logistics - Higher fuel and freight costs may hit margins quickly.
• Importers & Manufacturers - Expect energy-linked cost increases across materials and production.
• Financing Strategy - Central banks may delay further rate cuts if inflation rises again.

Tip: Stress-test your budget for a 5–10% rise in energy costs. Consider locking in fuel prices or renegotiating contracts with energy and logistics providers. Stay informed on geopolitical developments to avoid being caught off guard.

Watch Out For…

• Quota limits - UK-US deals are capped; timing and volume matter.
• Global volatility - New tariffs or policy changes can emerge quickly.
• Labour shortages - Hiring and retention remain a challenge in key sectors.

  
  Final Takeaway for SMEs

  The mid-2025 economy offers cautious optimism. Falling interest rates, clearer trade routes, and greater government support give SMEs room to grow but not without risks. Be proactive and review your finance structure, stay on top of export rules, and use the tools available to protect your margins and cash flow. If you’re not currently reviewing how economic trends like interest rates, trade deals, and exchange rates impact your business, now is the time to start.
  
  Understanding these shifts can help you make better financial decisions and spot growth opportunities early. We’re here to help you navigate the landscape and put the right strategies in place. Get in touch for a no-obligation conversation about how we can support your business planning.

  We're Here To Help

  For more information on how we can help you and your business, please contact us via info@oldfieldadvisory.com or call 02476673160 for support and advice. Let’s work together to grow and strengthen your business.

  Please note: This article is provided for information only and was correct as at the time of writing (19/06/25). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance. No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore, no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.