By Global Award Winning Business Coach Peter Boolkah
Over the past few weeks, I’ve been sitting across the table from business owners all over the UK. Different sectors, different regions, different ambitions, but all have the same spreadsheet issues.
For fifteen years, many UK SMEs have been operating inside a strange economic bubble. Cheap debt has become a safety net, a way for many to smooth over inefficiencies, postpone difficult decisions, and keep businesses alive that really, on paper, probably shouldn’t have been. That net is now broken. This year, the fear is that many firms will feel the full force of not having it in place to catch them.
With the base rate still sitting around 3.75%, nearly four times the 1% average many businesses were built on, and the National Living Wage now at £12.21 an hour, the maths simply doesn’t work the way it used to. When you add energy costs, business rates, and supply chain pressures, what once felt like a “manageable squeeze” has become structural stress. In 2025, corporate insolvencies in England and Wales reached their highest levels since the 2008 financial crisis. Yet we keep hearing that this is just a temporary rough patch. It isn’t. What we’re seeing is the slow unwinding of “zombie” businesses. These are firms that existed primarily to service debt rather than generate real value. When you combine higher interest repayments with payroll costs that have risen by roughly 20% over two years, the traditional SME model simply breaks.
Let me be clear, this is not a call for panic, but it is a call for leadership.
The headlines this month about Claire’s Accessories entering administration are a reminder of what happens when businesses fail to adapt quickly enough. Nostalgia, brand recognition, and scale are no longer guarantees of survival. What matters now is agility. That’s why I point to the “new” Body Shop as a blueprint for what survival actually looks like. After its collapse, the business made hard, unsentimental decisions, halving its store estate, cutting 40% of head office roles, and ruthlessly focusing on what still worked. The result is a leaner, profitable 113-store operation built for today’s consumers, not those of yesterday.
This is the uncomfortable truth many SME leaders must face: growth is no longer about getting bigger. It’s about getting sharper. The businesses that will still be standing by Christmas 2026 are doing a few things differently now. First, they’re treating cash as oxygen. They aren’t approaching it as vanity revenue; they aren’t looking at top-line growth, but real, sustainable cash flow. If a product, service, or client doesn’t contribute meaningfully, it’s being challenged or cut. Second, they’re redesigning their cost base for a world where cheap money doesn’t exist anymore and may well not return for some time, if ever. That means fewer layers, clearer accountability, and embracing technology where it can genuinely replace friction. Leaders must ensure that they are not just growing tech subscriptions which are not working for their businesses. Third, and most importantly, they’re letting go of emotional attachments. Legacy sites, legacy roles, legacy ways of working. The phrase I keep repeating to business owners is simple: what got you here will not necessarily get you through 2026.
Ironically, I believe 2026 could become the blueprint for what a resilient UK economy actually looks like. Leaner businesses. Better productivity. Leaders who understand their numbers and make decisions early, not when the bank forces their hand.
The safety net may be gone, but clarity has replaced it. And for those willing to act, that clarity could be the most powerful advantage of all.
