Foreword Contents
The private enterprise sector encompasses a rich range of businesses, from large private players who rival PLCs in significance and reach, to family-owned businesses of all shapes and sizes, SMEs and a dynamic start-up community. Together, private enterprises power the UK economy, creating employment, productivity and growth.
But given the turbulent and fast-moving times we live in, how are private businesses faring and what is the outlook for 2025?
These are questions that we have explored in depth amongst the private enterprise community in our inaugural KPMG Private Enterprise (KPE) Barometer. Conducted towards the end of 2024 –shortly after the new government had delivered its much-discussed Budget at the end of October – we sought the views of 1,500 private business owners and leaders across geographies and business sectors in the UK.
The results are encouraging, displaying a confident and resilient sector that is full of ambition for the future. Growth is firmly on the agenda – through innovation, optimisation, diversification and, in some transactions, deals. Technology will be a key driver, in particular the massive potential of AI which businesses can leverage to improve the customer experience, drive increased operational efficiency and allow employees to become more productive in the areas of highest return.
This will help businesses strengthen their workforce and skills propositions, utilising people’s talents to their best effect. We also see a strong recognition in our survey of the importance of sustainability and the ESG agenda – another important factor in the recruitment and retention of talent. Not only that, there is a real commercial return from a strong ESG narrative as it can improve access to funding and increase enterprise value and deal multipliers.
But the nation’s private enterprise owners and leaders are not naïve. There is clear recognition that a variety of challenges lie ahead. Just as 2024 was a testing year of low economic growth and significant external change (including elections in both the UK and US), 2025 promises to be an unpredictable ride. The UK government has an ambitious programme to kickstart growth – but will it work and will the burden on businesses increase? How significant will the impact of measures in the Budget including a rise in employers’ National Insurance and changes to Business Property Relief be for private businesses? Further afield, will global trade wars intensify, and will the new US president impose protectionist policies that could affect the UK and other economies?
There are plenty of questions and unknowns. But what is certain is that the UK’s private enterprises are energised for the challenge and determined to succeed. It’s a picture of resilience, opportunity, growth ambition and entrepreneurial drive. It’s often said that SMEs are the engine of the UK economy – if that’s the case, the engine is purring as we get going in 2025.
I hope you enjoy reading our first KPE Barometer and that the insights it contains stimulate your own thinking and ambition.
Key findings
01 Business Outlook
A buoyant picture of diversification and growth
The results of KPMG’s inaugural Private Enterprise Barometer show that UK private enterprises are confident and poised for growth. Of the 1,500 business owners and leaders surveyed, 92% are confident about their company’s growth prospects, with 59% describing themselves as very confident.
Such high levels of optimism suggest that private enterprises have weathered the challenging trading conditions of recent times and believe they have the resilience to leverage opportunities ahead.
When asked about the main driver for this growth, the most cited factor (52% of respondents) was increased demand for their company’s products and services, followed by plans to introduce new technology (43%), plans to enter new markets or launch new products and services (43%), and a more positive outlook for the UK economy (42%).
Respondents are focusing on new opportunities and innovations. Many have expanded their product lines or diversified their service offerings, acknowledging the importance of adaptability and foresight in the current market environment. By utilising this approach, businesses can aim for long-term success in a dynamic and competitive environment.
However, it is not a universally confident picture, with nearly one in ten business leaders expressing doubts about the future. Amongst these, the most widely cited factor was cost pressures (51%) followed by a less positive outlook for the UK economy (48%).
But how will businesses achieve their growth ambitions? When asked how they will diversify, 69% said they will do so through launching new service lines or product categories, while 63% plan to enter new markets including overseas.
The most widespread international destination, unsurprisingly, is Western Europe (40%), followed by Eastern Europe (35%). North America is in the sights of nearly a third of executives (31%) while other continents such as Australasia, Asia, the Middle East and Africa all feature in the plans of around a fifth of leaders.
Top 3 destinations to enter new markets
Certainly, while businesses’ confidence is heartening, there remain many factors that could blow their ambitions off course. The global picture is volatile with ongoing geopolitical tensions and the increasing possibility of entering an era of escalating trade wars and tariffs, which could have significant implications for global trade and growth.
Businesses need to address pressure points by focusing on operations, digitisation, and sustainability. It is important for all types of businesses to maximise operational effectiveness and efficiency. Investing in the future has become increasingly important.
Financing and deals: strong balance sheets put M&A on the agenda
For a third of respondents, acquisitions and M&A activity will be another route to growth. The responses underline the high degree of entrepreneurialism in the private business sector, as well as suggesting that a spate of dealmaking could be around the corner as businesses convert what has been largely a pent-up intention into action.
The results also uncover a striking financial confidence. Over half of business owners and leaders (54%) say that they expect to finance their diversification activities from their own balance sheets, i.e. from the company’s cash reserves, suggesting that the majority of businesses have been generating healthy profits at least a portion of which they have been able to set aside.
Of those that will be looking for external sources of funding to help finance diversification, private equity (PE) is the clear destination of choice. Over four in ten (41%) respondents cite PE, with capital markets (such as an IPO) coming next (34%). Senior debt finance – traditional borrowing from a bank – comes noticeably further back, at 27%.
The findings demonstrate how the financing market has shifted in recent years – PE rising as a funding partner while high street banks have dropped back. They also suggest that there could be a significant uplift in new listings and capital markets activity –which would be a welcome tonic to the markets after a subdued few years.
54%
plan to finance diversification themselves.
As we enter 2025 the global landscape remains relatively uncertain, while businesses in the UK have also been bracing for rising tax and cost burden. That could see a weaker business investment, which is unfortunate given its pivotal role in underpinning UK’s growth momentum. Nevertheless, falling interest rates and relatively strong government spending could keep overall growth unchanged this year, providing some opportunities for businesses.”
4/10
respondents cite Private Equity as most likely external source of funding to help finance diversification.
The results paint a picture of increasing corporate activity with a potential spate of deals, flotations and capital raisings. Private equity looks set to play a key role, with plenty of capital to deploy and a willingness to pursue a buy and build strategy where they see good potential for growth. After several years of somnolent conditions, 2025 looks set to be a year where the market wakes up and private businesses press the button on their growth ambitions.”
Neil
McManus, Head of Business Services M&A, KPMG in the UK
Yael Selfin, Chief Economist, KPMG in the UK
02 Investment priorities
Growth can’t be achieved without investment – and private enterprise owners and leaders have identified a number of priority areas to direct funds towards that will help drive their business success.
Technology tops the list Technology is the clear leader in terms of investment intention, cited by nearly two-thirds (63%) of executives. Nearly half (47%) also named the related area of innovation as a key focus.
Perhaps unsurprisingly, artificial intelligence (AI) topped the list of tech investment with 73% of respondents naming it as their priority. With AI developing rapidly and enabling everything from automation and process efficiency to market analysis and content generation via generative AI, it has become a hot ticket area for organisations of all sizes and across sectors.
Cybersecurity was the second most widely planned technology investment area (64%) which demonstrates the sustained importance of bolstering cyber and information security defences in a world of proliferating threats.
But alongside these two areas, other systems enhancements are also on executives’ minds. Around four in ten plan to invest to enhance ERP and CRM systems, while 45% want to bolster their general reporting & analytics capabilities.
Some private enterprises are earlier on the digital transformation curve than their PLC counterparts including the migration to the cloud and the integration of enterprise-wide IT platforms, and this shows through in the results.
In terms of the benefits they are looking to drive, private business leaders are focused on improving the customer experience (58%) closely followed by improved decision-making through better insights (56%) and improved process efficiency (55%). For a significant proportion (45%) improving the employee experience is also a priority, and nearly half (48%) want to reduce risk by bolstering controls. Meanwhile, looming obsolescence of legacy or unsupported systems is another common driver (38%).
say technology is the main priority for investment in 2025
Without leveraging the transformative power of AI, it is increasingly impossible to be a top player in customer excellence. AI is either working 24/7 behind the scenes to optimise operations or is at the forefront of communicating with customers about their needs and helping to meet them.”
Simon Albrighton, Head of Advisory, Private Enterprise, KPMG in the UK
Driving efficiency and productivity
Digital transformation is high on the agenda. Some private enterprises and SMEs have technological ground to make up in order to compete with their bigger listed peers; while for others it is about leveraging new technology to bolster operating efficiency, productivity, and customercentricity. AI is top of mind. In 2025, I expect to see this turning into a very considered execution of specific AI use cases, as proofs of concept are actualised around key processes for the running of the business.”
As businesses adapt to today’s evolving cybersecurity, digital transformation and AI challenges, commitment and resilience are essential. Many respondents in our survey indicated that an AI adoption strategy is a priority for achieving organisational success.
But this will only happen if a sound framework for AI adoption is in place – such as KPMG’s Trusted AI approach – and if the workforce has the technical capabilities and skills needed to unlock the benefits. To fully realise technology’s potential, human expertise and ingenuity are crucial.
Workforce complexities
You can’t drive a successful business without talented and productive people – so it was no surprise that workforce and skills was the second most prominent investment priority named by half of leaders (49%).
However, while there are fairly high consensus levels around technology investment plans, the picture relating to workforce is more mixed – indicating the complexity of people-related issues and perhaps the variations in the people agenda that exist across different sectors.
Just over half (55%) of executives were confident in their ability to recruit people with the right qualifications and experience for their business –but nearly half were not. The lowest levels of confidence in this regard came in the public sector, healthcare and hospitality. Around a third (35%) admitted they were finding it challenging to recruit people with the right skills, while a quarter said that the challenge was around retention.
In response, nearly half of businesses (43%) are looking to reskill some of their existing workforce while 37% are rethinking their Employee Value Proposition to help with recruitment and retention.
Skills shortages, rising costs through increases to the National Minimum Wage and, more recently, employer National Insurance contributions, and growing competition for the best talent are all making workforce dynamics a challenging area to optimise.
The world is digitising, but it’s the businesses that can bring technology and people together that will truly succeed. Enhancing people’s roles through technology – upskilling, reskilling and where necessary redeploying – is becoming key to recruiting and retaining talent. The people dynamics are complex – and more important than ever.”
As the nature of work evolves, digital transformation and automation significantly influence the skills required in the workplace. Cultivating an agile workforce that is adaptable to change is key to ensuring the achievement of desired outcomes while mitigating any adverse effects. 4/10 plan
The uneven nature of the survey results demonstrates this complexity – and indicates that getting the talent proposition right will be a key component of success for the private enterprise sector moving forward.
Euan West, UK and EMA Head of Private Enterprise, KPMG in the UK
Kate Holt, Head of People Consulting, KPMG in the UK
03 Sustainable business
Sustainability was named as an investment priority by 44% of leaders – a testament to the rising profile of the environmental, social and governance (ESG) agenda.
This proportion is striking because many private businesses are not yet captured by ESG and sustainability regulatory requirements – yet they are still choosing to invest in it. The most widely cited specific investment area was sustainable materials (60%), followed by supply chain (56%) and sources of energy (53%).
There are several factors at play here. Although the great majority of private businesses are not yet subject to ESG regulations such as the EU’s Corporate Sustainability Reporting Directive (CSRD) which began to come into effect for the largest businesses with an EU footprint during 2024 (including some of the biggest private enterprises), they may be coming under more pressure to meet certain ESG standards from large corporate customers who are subject to CSRD.
The supply chain ripple effect is becoming evident. Secondly, the sustainability agenda is becoming more important to many consumers – and is encouraging businesses to build their ESG credentials as part of their brand positioning and competitive differentiation.
There is also a link here to the workforce and talent proposition, with a strong sustainability profile helping to attract and retain staff who increasingly care about these issues (particularly Millennials).
There is a commercial and financing aspect too. Strong and proven ESG credentials can improve access to funding, making a business more attractive to lenders including private equity and also opening the door to cheaper borrowing and discounted rates. Not only that, but if there are plans to sell or float the business, a mature ESG profile has been proven to augment enterprise value.
44% of leaders will invest in sustainability
Many private enterprises have real ambition around the sustainability and ESG agenda – and that’s visible in our survey results. Even though many private enterprises are not yet obliged to do so through regulation, they are making the decision to invest in ESG as a source of sustainable value. At the same time, the pressure to take the lead is rising as ESG considerations spread across value chains. This will be a big area going forward – and a major item on the boardroom agenda.”
Richard Andrews, Head of Environmental, Social and Governance (ESG), KPMG in the UK
All of these factors make the ESG agenda increasingly compelling – and our Barometer shows that private business leaders are acting on it. This was also reflected globally in KPMG’s recently published Global CEO Outlook 2024: the private company perspective where the top three reasons for investing in ESG amongst private businesses around the world were building customer relationships and positive brand association (31%), shaping capital allocation, partnerships and M&A strategy (25%) and attracting the next generation of talent (17%).
Those businesses that put sustainability at the heart of their operating model and invest in it can derive competitive advantage and drive growth. Adopting this focus will help organisations build long-term resilience in an increasingly sustainability-focused marketplace.
Regulatory compliance influencing decision making
While lower than other areas, regulatory compliance was also named as an investment priority area by 29% of respondents.
The regulatory burden is increasing, with some of the largest private businesses already falling into the scope of the EU’s CSRD, while wider UK corporate governance reform, that includes more stringent requirements and individual director liability over internal controls, is in the process of finalisation – with a possible effective date of 2028, only three years away and requiring significant preparatory work well in advance.
29% are looking at alternative sources of energy have regulatory compliance as an investment priority
The most widely cited reason for investment in this area is to increase efficiency in reporting and compliance (60%), while nearly half of executives (48%) say they want to strengthen internal controls and four in ten are acting due to an increased focus on the ESG agenda.
A further spur – as with sustainability –may be to increase the attractiveness of the business to investors and/or buyers, bolster its market value, and increase the likelihood of obtaining finance on more attractive terms.
Alongside growing external scrutiny on good governance and robustly assured financial and non-financial information, the reasons to invest in regulatory compliance systems and processes are stronger than ever.
The regulatory bar is steadily rising and private enterprises are responding. Sustainability is high on the agenda with the EU’s CSRD already beginning to capture larger private businesses. ESG assurance is a very live topic given the planning needed to define the requirements and ensure robust data flows. But it’s not only sustainability – corporate governance and internal controls requirements are undergoing a significant overhaul. Boards and Audit Committees need to stay highly attuned to the fast-moving environment and retain a firm grip on compliance.”
Keki, Head of Audit, Private Enterprise, KPMG in the UK
53%
Top 3 reasons for investing in ESG amongst private businesses around the world
Aimie
04 Taxation and the Budget
If the Barometer findings are in general positive and indeed bullish, there are nevertheless a range of barriers that executives will need to navigate their way through.
One of these is the government’s Budget that was delivered on 30 October 2024. Two measures in the government’s proposals excited particular attention – an increase to employer’s National Insurance contributions (both increasing the percentage rate payable, and lowering the threshold at which it applies, capturing more staff including many part-time workers) and changes to Business Property Relief and inheritance tax.
These changes come alongside a further increase in the National Minimum Wage and a forthcoming package of reforms to bolster workers’ rights. Taken together, they will significantly increase the costs that employers have to bear – affecting almost every business.
Concern about the impacts of the Budget are reflected in our survey results. Over a third of respondents (37%) said the measures will impact business profitability, while 31% feared the changes will affect their ability to expand within the UK or internationally. The same percentage said the Budget will have the general effect of reducing their ability in invest in growth opportunities. Nearly one in five (19%) disclosed that it will inhibit their investment in ESG efforts.
However, while these results demonstrate a degree of anxiety, they are not as stark as may have been feared. The majority of respondents were neutral about the impacts rather than negative. This indicates that the Budget’s measures are generally viewed as a bump in the road that private enterprises have the capability to deal with.
37% said the measures will impact business profitability
25% are not confident in growth due to changes in tax policy
Tax in focus
Where does the new package of tax measures leave private enterprise leaders and business owners?
For business leaders – such as CEOs and leadership teams of private equitybacked companies – the focus is likely to be on how they can recover the Ebitda hit they can expect to suffer due the Budget’s NIC changes. The increase in employers’ NIC, and the lowering of the threshold at which it becomes payable, will increase employment costs and directly hit profitability. Businesses are likely to need to either find cost savings elsewhere, put prices up, reduce staff numbers, or increase employee productivity – or a combination of these.
The impact will be disproportionately large in sectors that employ high numbers of low-paid and also part-time workers because significantly more of these will attract employers’ NIC. Sectors like retail, leisure, hospitality and manufacturing could be particularly hard-hit. Those businesses that have embraced a part-time model for a significant number of their staff may need to reassess their approach.
For business owners and family businesses, all of the above issues will be relevant – but it is likely to be the succession and inheritance impacts that are top of mind.
Changes to IHT – such as around Business Property Relief (BPR) – mean that many owners are concerned about the implications when passing the enterprise on or continuing the lineage of the business. It isn’t just farmers and agricultural businesses that are affected – although many of the headlines have been around the impact there. All owners of private/family businesses could be affected. Careful tax planning has become more critical than ever in order to limit the effects.
The additional tax liabilities that many family-owned enterprises could be faced with may also lead to increased numbers of liquidity events where businesses raise funds by selling a minority equity stake, taking a bank loan or negotiating structured finance.
For non-doms and the personal tax regime, there are some significant changes on the way from April 2025 as the UK moves away from a domicile as a relevant connecting factor to a residence based system. There are material changes here which apply from 6 April 2025 which means that anyone currently classified as a nondom should consider their existing and future tax position and discuss what this means for them with their tax advisor. KPMG teams are very busy working through these changes with our clients.
I can’t remember a time where we’ve had so many taxrelated issues to discuss with clients. The tax environment for private business owners and leaders was already active, but since the Budget there are even more live issues and factors to consider. The situation can perhaps be summarised as the tailwinds of a positive market meeting the headwinds of tax rule changes. The headwinds are unlikely to completely blow businesses off course – but they may mean that some replotting of the coordinates is needed.”
Grant Ashbrook, Partner, Tax and Legal, Private Enterprise and IGH, KPMG in the UK
Tech Sector in Focus Regional overview
With technology out in front as the most widespread investment priority for private enterprises, it is no surprise that the Technology sector respondents in our research report strong levels of confidence. Demand for hardware, software and IT implementation services is riding high – meaning the issue for the Technology sector is not one of volume of business, so much as working capital and margin.
are confident about growth prospects
92% 81% 54% 73% 41% 76%
are looking to reskill some of their existing workforce
Private equity is the most popular external financing route are planning to launch new services or product categories
AI and cybersecurity are the dominant focus areas
are looking to enter new markets (including overseas)
are focussing on sustainability (use of sustainable materials)
The UK private enterprise Technology sector will need resilience and adaptability, as well as a supportive policy and regulatory environment, to keep punching its weight and compete in what is a truly international digital market.”
Joe Cassidy, Head of TMT, KPMG in the UK
are concerned about a hit to profitability due to the Budget
While these findings are encouraging overall, the Technology sector is fast-moving and unpredictable. The entrance of China’s DeepSeek into the AI market is an illustration of this – suddenly disrupting the industry and sending US Big Tech stock prices into freefall.
Probably more than any other sector, Technology businesses must have agility and flexibility at their core. Data consumption patterns and therefore pricing models keep shifting as new tools and capabilities come on stream.
Are you ready for the challenges ahead?
The UK’s private enterprises are confident and ambitious –but also need to stay agile and vigilant in an increasingly complex environment that holds many downside risks as well as opportunity.
As our survey shows, there are a number of clear levers to facilitate growth, with technology, workforce and ESG being key areas.
If you are a private enterprise owner or leader, are you confident that you are in control across these critical dimensions?
Technology
• Will your approach to AI and gen AI help your business become more productive and efficient without creating new risks?
• Do you have the data flows and IT infrastructure that you need in order to capitalise on the potential of AI? Do you have sufficiently robust cybersecurity and privacy protections in place?
• Is there a clear governance and ethics framework for your technology and AI activities –such as the model embedded into the KPMG Trusted AI framework?
Workforce
• Do you have a compelling Employee Value Proposition to help you attract and retain talented staff?
• Have you mapped out the likely future talent needs of your business, including how generational shifts may affect this?
• Do you have a clear strategy for upskilling and reskilling staff, enabling them to be confident and productive with new technologies such as gen AI?
• Are you aware of changing regulations to understand what sustainability-related metrics you may be required to report on in the future?
• What are the most important ESG factors from stakeholder, investor, customer, regulator and staff perspectives – and how is your business planning to meet their expectations?
• Are you leveraging technology and the expertise of third parties to help you meet ESG goals and also data and reporting requirements?
Finally, a common theme running through the schedule ahead of private enterprises is to embrace the new: new products and services, new technology, new markets, new corporate partnerships and deals. This comes with a high cognitive load. Successfully managing so much innovation and change will require resilience, stamina and determination. It’s important to ensure that business teams and staff have the support they need – but owners and leaders also need to think about themselves. Are you considering your own wellbeing and personal agenda, and engaging the support you need through business networks, external advisors and mentors?
Make sure you and your business are equipped for the journey. At KPMG, we stand ready to support and advise you through all the cycles of business transformation, ambition and growth.
Methodology
Thank you to all our survey respondents. Research for the Enterprise Barometer 2025 was carried out on behalf of KPMG in the UK by OnePoll UK, in November 2024. The survey was conducted with 1500 business owners and C-suite employees in UK privately owned businesses, employing 1-500+ people across various sectors across all regions.
Get in touch
Whether you are establishing or scaling a new venture, planning an investment or exit, we are here to support your business growth. Our multidisciplinary KPMG Private Enterprise teams work across the UK to support privately owned businesses to grow.
Get in touch to discuss your ambition.
Euan West UK and EMA Head of Private Enterprise KPMG in the UK e: euan.west@kpmg.co.uk
kpmg.com/uk