Businesses in the UK are sinking deeper into a quagmire of rising costs, thanks in large part to the fuel crisis, geopolitical challenges and employment legislation.
Given the scale of those roadblocks, it’s no wonder UK CFO confidence has dipped to a six-year low. According to Deloitte’s latest CFO Survey, conducted between 16 and 30 March 2026, optimism among UK finance leaders fell to a net -57% – down sharply from -13% in the previous quarter.
The CFOs named geopolitical risk as the greatest external threat to their businesses, with energy prices and inflation rounding out their top three worries, and 61% of CFOs flagging both as major concerns for the next three years.
While Deloitte’s survey covers the UK’s largest businesses, it sheds light on the ripple-effects for small businesses, which not only form the backbone of the UK economy, but also have far less room to absorb the shocks.
The pump price crunch
For sole traders, the biggest fallout from geopolitical instability has come in the form of rising fuel costs.
A recent survey, FairFuelUK’s March poll of 3,678 sole traders (bricklayers, plumbers, electricians and others across the UK), found that 36.4% said current pump prices could drive their businesses to the brink of collapse without intervention from the Government. For these trades, it’s clear that volatile fuel prices aren’t an abstract risk. Without help, they eat into every aspect of the business, from day-to-day operations to hiring.
The Deloitte data puts this in broader context. In the CFO Survey, higher energy prices received a rating of 70 this quarter (100 being the highest), up from 47 just three months ago. When the UK’s biggest companies are rattled by energy costs, the smallest ones are already in crisis.
What Employment Hero’s March Jobs Report says
While Deloitte’s survey captures sentiment across large businesses, Employment Hero’s March Jobs Report tracks actual hiring activity across the UK’s SME sector – and the picture it paints is more nuanced than a simple slowdown.
The data shows full-time employment across SMEs is up 14.6% year-on-year – a figure that sits nearly three times above the overall employment growth rate of 5.3%. Month-on-month, full-time roles grew 1.1% in March, and over the past three months they’re up 4.2%. On the surface, that looks like resilience.
But part-time and casual work tells the opposite story. It fell -0.5% month-on-month in March and is down -0.4% over the past three months. While the annual picture is modestly positive at 3.3%, the trajectory is clear: SMEs are creating full-time roles at pace, and pulling back from flexible arrangements.
The reasons are no mystery. SMEs have been absorbing wave after wave of cost increases over the past 12 months. Employer National Insurance contributions rose in April 2025, with the Bank of England finding that more than half of UK businesses (53%) expected to reduce headcount in response – a figure that remained above 43% months later.
Additionally, the National Living Wage for workers aged 21 and over rose to £12.71 an hour in April 2026, a 4.1% increase that has placed mounting pressure on sectors reliant on lower-paid, flexible staff. And Employment Rights Act measures – including day-one sick pay, extended paternity leave and greater liability exposure from employment claims – have added yet another layer of cost and obligation.
A broader jobs market holding its breath
The KPMG and REC UK Report on Jobs, also published this week, paints a similar picture across the wider economy. Permanent placements fell again in March – with Middle East conflict and rising costs both cited – while candidate availability rose at its fastest pace in 2026 so far, driven by redundancies and job scarcity. Starting salaries, meanwhile, grew at their weakest rate in five months.
What this means for SME employers
What makes this landscape particularly challenging for SME leaders right now is the fact that there are mounting pressures to manage. Not only is global instability pushing up energy prices, domestic policy is raising the cost of every hire too. A cooling labour market on top of this, while creating more candidate choice, won’t help to reduce the compliance burden each new employee brings.
Cost control is now the top priority for 68% of UK CFOs, up from 51% last quarter, according to Deloitte’s CFO Survey. For SMEs without the financial reserves that larger businesses enjoy, that same instinct – cut costs, conserve cash, hold fire on flexible hiring – could be the difference between keeping the lights on and closing the doors for good.
