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There is a quote from George Bernard Shaw which states that if all the economists were laid end-to-end, they’d never reach a conclusion. However, it does appear that the vast majority of economists have concluded that 2026 is going to be a challenging year for the UK economy with growth set to plateau at around 1.2%; although forecasts of 1% are easy to find e.g. KPMG. Furthermore, Ipsos found that 51% of the Britons it polled expected the UK economy to enter a recession in 2026.
On a slightly more positive note, the Bank of England believes that inflation will slowly fall to 2.5% by the end of 2026, which, however, is still above its 2% target.
In other words, 2026 is likely to be a testing year for businesses, with SMEs in particular facing employment, technology and operational/strategic challenges that could have a negative impact on their cost base.
This article initially provides an overview of these challenges and then highlights just a few areas in which Paperclip may be able to help SME clients to address them.
Employment
The biggest challenge facing Paperclip is finding, training, rewarding and retaining high quality team members. We put a considerable amount of management time and financial resources into this activity. I know from speaking to our clients that absorbs a lot of their time and resources as well.
The labour market in 2026 is predicted to remain as competitive as it was in 2025. This is particularly true for SMEs looking to recruit staff in specialist areas such as IT, AI and healthcare. There are simply not enough qualified people with business experience available in these areas of activity. The result is likely to be wage inflation for those roles that are in high demand.
General employment costs are set to rise in 2026. In addition to rises in the minimum wage fuelling wage inflation as differentials are maintained, National Insurance and pension contributions are a significant burden on SMEs. Furthermore, from April 2026, Statutory Sick Pay is payable from the first day of sickness absence rather than the fourth.
Other factors impacting on employment costs and labour market rigidity include the fact that from April 2026 new starters are eligible for paternity leave i.e. it becomes a ‘day one right’. From October 2026 the time allowed to bring an employment tribunal claim will be raised from three to six months. It is also expected that the Government will further strengthen the rights of employees in the area of flexible working. It is clearly as important as ever for SMEs to keep abreast of HR rule changes.
Operational/Strategic
Employment costs are just one of several input costs that are likely to rise in 2026. For example, utility bills are set to increase as well. Rising costs lead to reduced margins.
SMEs have only limited options as to how to retain and grow margins. Prices can be raised, but this could be at the risk of losing customers. An alternative is to focus on driving efficiencies through the business to reduce unit costs.
Whatever price strategy is followed, maintaining liquidity through effective cash management is vital. It is important that SMEs maintain a focus on credit control. Whilst funding alternatives such as invoice financing may be a necessity in some situations, they come at a cost.
For SMEs in the B2C sector, particularly businesses with an e-commerce offer, consumer protection is being strengthened through the regulation of digital markets.
On a positive note, the Government is seeking to further crack down on late payments by large customers to SMEs. Steps include strengthening the Small Business Commissioner’s role. I must admit I was unaware that such a role existed (https://www.smallbusinesscommissioner.gov.uk/).
At Paperclip we have noticed an increase in our internal statutory administration load, and we expect this to continue into 2026. Drivers include tax, NIC, HR, ID verification and more. In some sectors there will be a significant increase in the data, and granularity of data, needed when reporting to regulators.
Technology
In any period of rapid technology change a skills gap appears and takes time to resolve. As mentioned earlier, in 2026 SMEs will struggle to recruit and retain specialists with digital and AI skills, with wages offered by larger corporations siphoning talent away from the SME pool.
Most SMEs recognise the benefits of adopting automation and implementing AI and digital platforms. However, without the skills there is a risk of productivity gaps appearing compared to larger businesses which have the resources to be first to market.
One way of responding to this changing technology landscape is to invest in training. IT, AI and digital training is set to boom in 2026.
Each sector is also facing its own specific challenges
Whilst the factors outlined above apply to most SMEs across the board, each specific sector will be dealing with certain challenges that are specific.
Healthcare is a case in point. The demand for private healthcare services is forecast to grow significantly in 2026. More employers are offering private medical insurance (PMI)as a benefit for employees, and individuals are digging into their savings to finance treatments they would otherwise face a long wait for.
Clearly, this growth in demand presents SMEs in the sector with a significant opportunity which, however, many are struggling to respond to due to skills shortages in, for example, areas such as physiotherapy. The strain on capacity as employees work longer hours to ensure waitlists are kept to a minimum is a challenge in its won right.
For healthcare businesses that fall within the remit of the Care Quality Commission, the new Single Assessment Framework demands the collection and reporting of up-to-date quality data. The CQC is moving away from scheduled inspections towards continuous oversight using data and unannounced checks. This means healthcare providers need to be ‘inspection ready’ at all times.
SMEs in the healthcare sector looking to treat NHS-funded patients have to address integration obligations. These obligations include things such as alignment of IT systems, shared protocols and data sharing. Such requirements can be technically and financially daunting for healthcare SMEs.
I recognise that the factors listed above are just a limited snapshot of the factors impacting on healthcare SMEs in 2026.
How can Paperclip help SMEs address the challenges they face in 2026?
When one looks at the actions SMEs need to take to address the challenges they face in 2026 as detailed above, they can be summarised as follows:
- Maintain cash availability through a focus on cost control
- Deal effectively with an increased admin burden
- Retain existing customers
- Work hard to find and win new customers
- Understand the strengths and weaknesses of new digital technologies, and resource effectively if implementing into the business
Challenge 1 - Maintain cash availability through a focus on cost control
There are two principal ways in which Paperclip can help SME’s with this challenge. Firstly, and most directly, the Paperclip team could make outbound calls on your behalf to chase up aged debt ensuring outstanding invoices are paid as quickly as possible.
Secondly by outsourcing non-core services to Paperclip SMEs can turn fixed costs into variable costs. With, for example, Paperclip answering your incoming calls you only pay for the minutes used, As such, costs rise and fall in line with usage. Outsourcing routine tasks such as call answering and admin support enables your team to focus on those core activities that drive growth and profitably. At the margins, using Paperclip may mean you can avoid or delay recruitment with all the associated costs and commitments that brings.
Paperclip is itself a strong believer in the outsourcing business model. We use external specialists for all non-core services including accounting/bookkeeping, cleaning, IT support, SEO and more.
Challenge 2 - Deal effectively with an increased admin burden
It’s important to differentiate between routine and specialist admin tasks. Paperclip already helps many of its SME clients with routine admin tasks, freeing up the client team to focus on specialist admin activities such as, for example, regulatory reporting where applicable.
If you are an SME it may also be worth reviewing your admin burden and deciding whether ‘specialist’ admin tasks are indeed specialist or simply ‘the way we have always done things’.
Should you be unsure whether Paperclip could handle an admin task you would like to outsource simply call me on 01246 418 181 and we can talk through what you are looking to achieve.
Challenge 3 - Retain existing customers
When economic growth is slow it becomes ever more important to look after and retain your existing customers. There are several ways win which Paperclip can work with you to achieve this:
- Call answering – Paperclip can ensure that your existing customers’ calls are answered promptly. An unanswered call risks damaging your relationship with a customer.
- Customer care calls – It is easy to take existing customers for granted when the focus is on winning new ones. Existing customers rarely leave with a ‘bang’ but quietly and slowly over time as service and trust is eroded. The Paperclip team can make regular outbound customer care calls to your existing customer base, Such calls not only provide an early opportunity to pick up on customer discontent and respond to it, but they can also prompt sales opportunities.
- Contact centre – If you are an SME it can be difficult to compete with larger corporates with their in-house contact centres. Paperclip provides many of its SME clients with their own bespoke contact centre through which all customer care calls are routed. The contact centre service also includes outbound calls as required. Clearly, there is requirement for consultation, preparation and training before a client can launch and promote its (Paperclip) contact centre offering.
Challenge 4 - Work hard to find and win new customers
Whilst the overall economic outlook isn’t encouraging, there will still be opportunities for SMEs that are innovative, resourceful and effective at winning and retaining new customers.
Most SMEs undertake a variety of marketing activities to generate interest and attract new customers: networking, advertising/PPC, exhibitions, social media, e-marketing and more. The principal call to action for many of these marketing activities is to ‘ring us’. Despite the advent of WhatsApp, email, SMS and other digital communication channels, for many SMEs the phone remains the most important communication channel for engaging with new customers. Consequently, it is vitally important to ensure that, having invested in the marketing activities that generate the call, all calls are answered – and in quick time.
Answering your incoming calls professionally and effectively in quick time is Paperclip’s core skill. It makes a huge difference to a prospect’s impression of an SME if their call is answered in this way. It immediately starts to build trust.
In addition to answering the call, the Paperclip team is able to capture prospect data, update your contact management system in real times, take payments over the phone and much more besides.
If you are looking to improve your prospect conversion rates in 2026 then Paperclip can help.
Challenge 5 - Understand the strengths and weaknesses of new digital technologies
Whilst Paperclip cannot help directly with digital technologies, it is an area we keep a close eye on. For example, we have trialled AI voice agents. Whilst the tech was very clever, our current view is that the benefits of human interaction outweigh the systematisation of AI. We were also concerned that once a caller understood they were talking to an Ai voice agent they would get annoyed and frustrated, and this would have a negative impact on their perception of the business they are calling.
Another flaw of AI that became apparent during our review is that AI is focussed on being friendly and solving your problem. On occasions, when it is unable to directly respond to your query, it can end up filling in the ‘blanks’ and providing a misleading response. This is on top of the technical ‘hallucinations’ that occur from time to time but which should reduce as a system’s learning builds
Conclusion
Whether an SME has a successful or stagnant 2026 will depend in large part on the way it responds to the economic, technological and strategic challenges it faces.
In may cases Paperclip’s services can help SMEs by increasing their operational flexibility and agility. Surely that is worth an initial discovery call to find out whether Paperclip can help your business?
You can contact me on 01246 418 181. I look forward to helping you.
Hi, I’m Louise Bellwood, Director at Paperclip. I am responsible for delivering Paperclip’s customer service and growth strategies for 2024 and beyond, I am a crusader for the benefits call answering can deliver for organisations of all kinds; customer service, sales generation, customer retention and more. If you have a question about call answering – pricing, set-up, benefits – I would love to hear from you at louise@paperclip.co.uk or 01246 418 181.