A significant number of small and medium-sized UK companies are reported to be sitting on sizeable cash reserves, but are holding back on investing as a result of persistent uncertainty, new research claims.

According to accounting and advisory group Azets, a large number of UK SMEs currently have “significant piles of cash”, but are “paralysed by fear” and hesitant to invest due to ongoing global uncertainty and a lack of a clear UK economic policy.

Azets’ spring survey showed that UK SMEs consider economic uncertainty, geopolitical instability and trade tariffs to be among their chief concerns over the next year. Higher labour costs were listed as the number one worry, while a volatile tax landscape and the absence of long-term financial predictability were also among the leading concerns.

Commenting on the findings from the report, Azets’ UK CEO Peter Gallanagh said: “SMEs are asking for clarity from the government around tax policy and long-term economic plans.” Without this clarity, Gallanagh warned, “confidence to invest simply won’t return.”

He continued: “Right now, SMEs are treating cash as insurance, not fuel for growth. We’re seeing caution override ambition – and that’s holding the UK economy back.”

“We need to fill entrepreneurs and business leaders with confidence that investments in growth areas will not be undermined by sudden policy shifts or unexpected regulatory changes down the line. SMEs have the ambition – the policy needs to catch up.”

In the wake of the report, Gallanagh has urged the government to heed the concerns of SME owners and commit to a new, long-term economic roadmap that will instil business leaders with the confidence to plan and invest in their company's growth.

This call to action comes following a Federation of Small Businesses (FSB) quarterly sentiment poll which showed that 27 per cent of owners believe that their business will either downsize, be sold or close completely within the coming year.

By contrast, just 25 per cent of owners believe that their company will expand in the next year - marking the first time that owner pessimism has outweighed optimism since the study began fifteen years ago.

The FSB’s headline confidence measure fell from -41 points in the first quarter of 2025 to -44 points in the second quarter, with SMEs hit by hikes to both the minimum wage and employers’ National Insurance Contributions.