With talent shortages, wage inflation, and economic uncertainty continuing to dominate business strategy, small and medium-sized enterprises (SMEs) are turning to a new growth engine: technology, not talent.
The British Chambers of Commerce reported that only 20% of UK firms increased headcount in Q1 2025 (down from 24% in Q4 2024), while 17% reduced staff, citing wage inflation and labour costs.
A Boston Consulting Group poll via the Financial Times revealed that 51% of UK businesses plan to prioritise AI investment over hiring due to rising employment costs and shifting growth strategies.
“With employment costs increasing, business leaders are under pressure to deliver more with less,” says Dominic Ball, Managing Director & Co-owner at Thinc.
“We’re seeing a clear pivot away from traditional hiring towards smarter, integrated systems that allow SMEs to grow without increasing headcount.”
“For small and midsize organisations in the UK, we are seeing a real drive towards using systems and automation to manage the repeatable mundane low-value tasks in the business, allowing their staff to focus on high-value activities.”
Rather than hiring for operations, customer service or finance, SMEs are implementing integrated software systems from CRM and ERP to e-commerce and analytics platforms that connect workflows, boost efficiency, and give leaders the real-time data they need to make smarter decisions, faster.
Recent industry data supports the shift:
- New research from Thinc reveals that better integration of data and systems is the main criteria for UK mid-market businesses when evaluating their core business systems
- The same study shows that 47% of decision-makers at these businesses see AI and automation as the solution to increasing demand
- A 2024 survey by Beaming and Censuswide found that 44% of UK SMEs are investing in automation and 58% are planning to deploy AI, up from 40% in 2023. The top priority? Driving efficiency.
- According to ChiefMartec, even small companies now use an average of 172 SaaS tools as part of their growth and operations strategy a sign that lean, modular tech stacks are the new normal.
“The most ambitious organisations have known for some time that the answer to greater efficiency and productivity lies in digital transformation. Today, the biggest buzz may be around AI adoption, but the real advantage is in process automation,” adds Ball.
“So much time is lost through manual processes, taking the data from one place to another. Better integration of systems is the key to taking these processes and automating them, freeing up people to focus on what matters.”
This trend is particularly relevant as UK SMEs face the tightest labour market in a decade. The cost of hiring remains high and retention is fragile. By investing in modular, best-in-class tech stacks, companies are building leaner, more resilient growth engines that can weather future shocks.
“If we’ve learnt anything from recent years it’s that businesses should expect the unexpected, whether that’s increased production costs, regulatory shifts or geopolitical tensions. One thing that is certain is that short-term fixes are getting more expensieve,” continues Ball.
“As businesses begin planning for 2026, it’s the perfect time to think about what investments will bring the most value. We’re seeing more and more businesses looking for a core system that can scale with their needs, hosting options that are cheaper and more secure, and tighter integration of their tech stack. Ultimately, this more strategic approach to technology is what’s needed to amplify the potential of their most talented people.”
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