As 2025 draws to a close, many UK SMEs are reassessing how best to manage their finances for the year ahead.
David Bharier, Head of Research at the British Chambers of Commerce, has highlighted how persistent inflation and rising costs continue to weigh on business confidence – making more proactive financial planning essential for businesses of all sizes.
SMEs also face tighter lending criteria, placing extra pressure on cash flow and access to capital.
Considering these findings, I share my predictions on the finance decisions SMEs are likely to prioritise in 2026.
#1. A greater focus on cash reserves
Analysis by Allica Bank shows that UK SMEs are being short-changed by high-street banks. Average interest rates on savings accounts sit at around 1.28%, compared with approximately 4% offered by challenger providers.
For a business holding around £750,000 in cash, that difference could represent more than £20,000 in potential missed interest over a year, depending on where those cash reserves are held.
Against that backdrop, Flagstone research shows 34% of SMEs plan to increase cash reserves in 2026, while a further 48% expect to maintain current levels. As businesses continue to hold significant cash balances, we expect more SMEs to focus not just on how much cash they hold, but on where it’s held – moving surplus funds out of low-yield accounts and into higher-yield cash saving options in 2026.
#2. Diversification is the new safety net
With the Financial Services Compensation Scheme (FSCS) deposit protection now covering up to £120,000 of eligible business deposits per authorised firm, we expect more SMEs to spread cash across multiple banks rather than holding all funds with a single provider. This helps smaller businesses to protect their cash while benefiting from a variety of interest rates and account features. On average, Flagstone’s SME clients hold funds with seven banks through the platform, so this kind of diversification is becoming a core part of resilient cash management.
Flagstone research shows that 56% of SMEs hold cash as an emergency reserve, while 45% keep it as a buffer against unexpected costs. This reinforces the role cash plays as a safety net – and why flexibility and security matter.
#3. Automation moves from advantage to necessity
SMEs will place greater emphasis on digital tools that automate cash-flow monitoring and reduce manual processes. AI-enabled reconciliation tools can simplify cash management, improving speed and accuracy while freeing up teams to focus on more strategic work.
Studies have found that Robotic Process Automation (RPA) systems ‘significantly contribute to the reduction of reporting errors’ in financial reporting, often outperforming manual processes in both efficiency and consistency.
Centralised dashboards also improve visibility, giving SMEs a clearer, more up-to-date view of their finances. Platforms like Flagstone allow businesses to manage multiple savings accounts all in one place, helping to improve returns while reducing the administrative burden on time-stretched finance teams.
#4. Labour costs take centre stage
According to our recent poll**, 53% of financial advisers think the biggest factor influencing how SMEs will manage their cash in 2026 will be rising labour costs.
A study by the British Chamber of Commerce supports this finding, with 73% of SME respondents stating labour costs remain their biggest cost pressure and even modest wage increases can have a direct impact on monthly liquidity.
With the National Minimum Wage set to rise from 01 April 2026, higher payroll costs may reduce the cash available for reinvestment, marketing, or paying suppliers on time.
As a result, SME resilience will increasingly depend on how effectively businesses manage their cash cycle and customer risk. For many, this will mean reassessing how rising costs are reflected in pricing.
We expect many SMEs to take a more strategic approach to pricing in 2026 – moving beyond simple price increases towards options such as tiered pricing or value-added bundles that help protect margins while retaining customers.
As business conditions remain unpredictable, many SMEs are likely to adopt more secure and flexible approaches to cash management in 2026 – from building stronger cash reserves to diversifying deposits and automating financial processes.
Notes to editors
Censuswide research commissioned by Flagstone, surveying 100 SMEs (1-249 employees), 24 November-01 December 2025
** Flagstone Poll canvassing opinions of 106 UK financial advisers, 8-12 December 2025
