A financial skills gap is said to be undermining the resilience and overall growth of small businesses across the United Kingdom, according to the latest research released by Xero, the global small business platform.
The study, conducted by Censuswide and Opinium, reportedly exposes a lack of financial confidence among entrepreneurs / business owners leading to mistakes and missed opportunities, with implications for individual businesses and the wider economy.
Despite only a quarter of UK small business owners thinking they lack necessary financial skills, the research indicates a more serious problem.
Nearly two in five are said to be unaware if their business was actually profitable this past month, and more than half tend to struggle with cash flow management.
This apparent uncertainty often leads to active avoidance: more than one in four (28%) business owners don’t think of themselves as ‘a numbers person’ – a figure that rises to “32% among female respondents and 38% for 18-34 year old entrepreneurs.”
Concerningly, more than half avoid finances, and one in five “are too afraid to ask financial questions, fearing they should already know the answers.”
Nearly half of accountants and bookkeepers surveyed (45%) “blame ill-informed conversations in places like the pub for the spread of financial misinformation.”
They fear this means small businesses are making “avoidable financial mistakes, with regulations relating to expenses being widely misunderstood.”
Half (50%) of accountants and bookkeepers surveyed say that they have worked with small businesses who tend to incorrectly assume the government will be reimbursing their expenses.
Some other key findings:
- A third (33%) of accountants and bookkeepers surveyed have met business owners who didn’t realize dividends were taxable
- One in ten (9%) of the smallest businesses (up to 9 employees) incorrectly believe that they don’t need to declare all their income to tax authorities
- For small businesses, accountants and bookkeepers are a hugely trusted source. Nearly all small businesses (98%) who have consulted them found the advice helpful.
This cultural resistance is fostering detrimental financial habits, including:
- Two in five (39%) small businesses failing to claim all eligible expenses, and over half (51%) are caught off guard by unexpected costs
- A quarter (26%) not setting aside enough money for tax or submitting a late tax or VAT return (26%)
- More than half of sole traders (59%) operate without a separate business bank account
- Half (51%) wrongly believe HMRC will contact them if a tax return is due
- A quarter (26%) of small businesses mistakenly believe that business purchases are exempt from tax
Kate Hayward, UK Managing Director at Xero commented:
“We are a nation of small business owners, but we are not a nation who trains our children to think and behave like entrepreneurs. Culturally, there’s a stigma around not knowing our numbers, with many I speak to worried that they should know more than they do. There’s no shame in it when nobody is teaching us about it, but businesses deserve more. So today we’re launching our own free program to help, but we are calling for further support from Government and industry. Plugging this skills gap will provide growth and economic stability, but let’s inspire entrepreneurs to dive in. Numbers are only scary if you ignore them; there’s no need to suffer in silence.”
The research, commissioned by Xero is based on two surveys;
The research conducted by Censuswide, was “polled among a sample of 500 UK Accountants or Bookkeepers serving businesses with 1-49 employees. The data was collected between 14.07.2025-18.07.2025.”
Censuswide abides by and employs “members of the Market Research Society and follows the MRS code of conduct and ESOMAR principles. Censuswide is also a member of the British Polling Council.”
Opinium surveyed “small businesses” or “small business owners”: 1,000 owners and decision makers in businesses with up to 249 employees.
Where referenced, “smallest businesses” refers to those that employ up to nine people. All business sizes referenced include sole traders. Survey fieldwork was run between “29 June 2025 and 11 July 2025.”