A Two-Year Analysis of SME Resilience Across the United Kingdom

Small and medium-sized enterprises (SMEs) form the backbone of the UK’s economy, making up the majority of private-sector businesses. These businesses are a critical engine of employment, innovation and local economic growth, and yet the environment in which SMEs operate has rarely been more challenging.

Over the past several years, firms have faced:

• persistent cost inflation
• rising wage and skills pressures
• elevated energy prices
• supply-chain disruption
• higher interest rates and tighter financial conditions
• weakened consumer confidence in many markets

These pressures have not been distributed evenly across the UK, and SME resilience therefore varies significantly from region to region, influenced by local economic structure, sector mix, business churn and the surrounding support ecosystem.

The team at BizSpace wanted to analyse these factors and how they have impacted SMEs. Our SME Business Survival Index uses official business demography data to assess how durable the UK’s SME base is across two consecutive years:

• 2023/24 cohort (businesses born in 2020)
• 2024/25 cohort (businesses born in 2021)

Each dataset reflects a different economic environment: the 2020 cohort was born into pandemic uncertainty and early inflation; the 2021 cohort entered a more mature but costlier, higher-inflation economy with rapidly rising interest rates. This report examines each year independently before drawing out how resilience has shifted across the UK.

2023/24 SME Resilience Analysis

(2020 Business Birth Cohort)

Economic Context

Businesses founded in 2020 faced a uniquely volatile landscape:

• The UK was emerging from pandemic lockdowns but economic activity was still uneven.
• Supply chains remained fragile and input cost inflation was accelerating.
• Energy prices were beginning their upward climb.
• Labour shortages were already acute in several sectors.

SMEs founded in this period were tested early and repeatedly. Their three-year survival outcomes create an important baseline for understanding regional resilience under extreme conditions.

2023/24 Three-Year Survival Rates

Three-Year Survival Rates (2023/24)

2023/24 Composite Resilience Ranking

Rank	Region	Composite Score
1	Northern Ireland	86.83
2	London	75.53
3	South East	64.22
4	East of England	57.34
5	South West	50.24
6	Scotland	44.69
7	Yorkshire	40.77
8	North West	39.39
9	East Midlands	28.01
10	North East	27.94
11	Wales	23.36
12	West Midlands	0.53

2023/24 Analysis

Northern Ireland leads the UK

Strong survival and comparatively low business-death rates place Northern Ireland firmly at the top.

The South East, East of England and South West show solid foundations

These regions demonstrate broad stability and durable SME ecosystems.

Wales, the Midlands and parts of the North exhibit weaker SME durability

Lower survival and higher death volumes contribute to the lowest resilience scores.

2024/25 SME Resilience Analysis

(2021 Business Birth Cohort)

Economic Context

The 2021 cohort was founded during:

• the steepest inflationary period in four decades
•  the early stages of the energy-price shock
•  historically rapid interest-rate increases
•  declining real household incomes
•  ongoing labour and supply shortages

These conditions produced a harsher operating environment than the prior cohort, and the survival and failure data reflect these pressures.

2024/25 Three-Year Survival Rates

Three-Year Survival Rates (2024/25)

2024/25 Composite Resilience Ranking

Rank	Region	Composite Score
1	South East	98.66
2	South West	97.03
3	Scotland	94.23
4	East of England	88.47
5	London	85.61
6	Yorkshire	75.04
7	East Midlands	73.29
8	North East	69.34
9	North West	43.60
10	Northern Ireland	35.23
11	West Midlands	29.87
12	Wales	22.39

2024/25 Analysis

The South East becomes the strongest SME environment in the UK

The region’s resilience improves markedly, driven by stronger survival rates and fewer business deaths.

The South West and Scotland follow closely Both regions demonstrate strong, stable SME ecosystems despite challenging economic conditions.

The East of England and London remain consistently robust

London still sees significant churn, but its survivability continues to strengthen.

Northern Ireland weakens considerably

Rising business-death volumes and lower survival affect overall resilience.

Wales and the West Midlands remain the most structurally fragile areas

Survival is low, and failure risk remains high relative to the rest of the UK.

Year-On-Year Comparison

Side-by-Side Ranking Comparison

Region	2023/24 Rank	2024/25 Rank	Change
Northern Ireland	1	10	▼ 9
London	2	5	▲ 3
South East	3	1	▲ 2
East of England	4	4	No change
South West	5	2	▲ 3
Scotland	6	3	▲ 3
Yorkshire	7	6	▼ 1
East Midlands	8	7	▼ 1
North East	9	8	▼ 1
North West	10	12	▼ 2
Wales	11	11	No change
West Midlands	12	9	▲ 3

Interpretation of the Shift

The South East is the most improved region in the entire UK

Its eight-place jump reflects:

• stronger SME survivability
•  far fewer deaths relative to births
•  stabilisation following earlier volatility

The South West and Scotland show consistent long-term durability

These regions maintain strong survival performance across both cohorts.

Northern Ireland experiences the largest deterioration

A fall from near the top to mid-lower tier suggests a sharp reversal, driven mainly by higher churn.

London remains volatile

Although survival improves, churn remains structurally high.

Wales and the West Midlands show minimal improvement from very low bases

Weak survivability persists.

The East Midlands shows meaningful strengthening

A three-place improvement signals growing stability in the regional SME ecosystem.

Conclusion

Across two years of analysis, the UK’s SME landscape shows sharp geographic divergence, shaped by shifting economic conditions and local business ecosystems. Inflation, energy prices, interest-rate increases and labour-market pressures have affected regions very differently.

Key findings include:

• The South East, South West and Scotland emerge as the most resilient parts of the UK entering 2025.
 • Northern Ireland, previously highly resilient, now faces rising instability.
 • London continues to display high activity and high churn, but survival is gradually strengthening.
 • Wales, the West Midlands and parts of the North continue to exhibit structural fragility.

For SMEs, the analysis highlights the importance of cashflow discipline, adaptability, and operational resilience, as well as the need to anticipate regional market pressures. For policymakers and business-support organisations, it reinforces the value of targeted regional intervention, especially in areas experiencing sustained business churn.

Appendix: Methodology

This appendix outlines the precise steps used to calculate all regional resilience scores for both years.

1. Data Inputs

For each region, four variables were used:

1. Three-year survival rate (%)
2. Business births
3. Business deaths
4. Calculated failure rate per 1,000 enterprises

2. Failure Rate Calculation

Failure rate = (Business deaths ÷ Business births) × 1,000

Higher values represent weaker SME resilience.

3. Normalisation

To allow comparison between regions, all raw values were converted to a 0–100 scale using min–max scaling.

Survival Score (higher is better)

survival_score =

  (region_three_year_survival – min_survival) ÷

  (max_survival – min_survival)

  × 100

Failure-Risk Score (higher is safer)

Failure risk is inverted so lower failure rates = higher resilience:

failure_risk_score =

  (max_failure_rate – region_failure_rate) ÷

  (max_failure_rate – min_failure_rate)

  × 100

4. Composite Score

Both components are weighted equally:

Composite Score = (survival_score + failure_risk_score) ÷ 2

5. Ranking

All regions are ranked from 1 (strongest) to 12 (weakest) based on their composite score.

The same method is applied to both datasets to enable direct year-on-year comparison.