2025 was neither an exceptionally good or an exceptionally bad year for SMEs, with modest GDP growth and an ease in inflation, but with rising cost pressures and an increased need for tech investment. So, what will 2026 hold in store for SMEs?
Toby Fitzherbert looks at the five biggest challenges that SMEs are likely to face in 2026 and offers insights into how they can navigate to deliver growth over the next 12 months.
1. Pace of tech change and need to invest in AI
The new world of Gen AI poses both threats and opportunities for SMEs. For those who can adapt and adopt, there is a genuine opportunity to outperform Enterprise-scale competitors. Not only that, but AI allows an SME to scale efficiently without putting significant cost in their business.
However, that makes it sound easy. Foundation models are still evolving rapidly, it is difficult to know which tech will be outsourced vs owned by Microsoft, AI regulation is still uncertain, AI skills are in tight demand, and barriers are cultural as well as structural for all businesses. Many lean SMEs simply do not have the time or the budget to spend on working out the art of the possible.
For this reason, it’s imperative that SMEs find trusted partners in the AI space – consultants and tools that can facilitate the processes and agents required. It is important to remember that SMEs don’t need to deliver all AI solutions themselves, but they should increase expectations on their third-party providers. PSA tools like CMap or HR tech like Ciphr are adopting AI in their processes, so SMEs can benefit from the AI revolution without needing to build the automations themselves.
2. Cost pressures
Rising employment costs will still be the dominant challenge for SMEs in 2026. The Autumn budget created a storm of pressures with the National Living Wage rising again in April 2026 and younger worker rates climbing even faster, while Employer National Insurance thresholds stay frozen. The Employment Allowance uplift will help the smallest end of SMEs, but most will still feel the squeeze. The focus on leveraging tech to automate tasks rather than hiring additional heads will be key, as well as outsourcing. A good example of this is Moneypenny, which allows SMEs to outsource their customer communications by phone and via web chat. It’s also important to maximise the productivity of your people, for example, Ciphr, which allows businesses to automate everything from routine HR tasks to delivering targeted training programmes, helping businesses free up time, improve engagement, and create a more productive workforce.
3. Cyber security and data governance
As businesses accelerate digital adoption and AI opens the ‘surface area’ for cyber-attacks, risks for SMEs will continue to increase in 2026. Threat actors are sophisticated and are targeting smaller firms as they know many lack dedicated security teams. For SMEs, the challenge is balancing resilience with cost, but security must go beyond endpoint protection or employee training, to deliver active monitoring.
Managed IT partners like BCN can monitor 24/7 and test vulnerabilities, while platforms like isms.online simplify ISO 27001 implementation and governance workflows so that cyber is embedded into culture and infrastructure.
4. Go-to-market in an AI world
Buyers continue to expect hyper-personalised experiences, instant responses and seamless digital journeys. At the same time, AI-driven search is reshaping how people discover all businesses, and it is often unhelpful for SMEs who are seeing eroding performance from organic or paid marketing on Google. However, while those that are reliant on ppc to drive leads may find challenges ahead in 2026, more generally, the search landscape has broadened, which may create opportunities for businesses who adapt quickly to tactics such as GEO, LLM optimisation, and increased use of social search across the customer journey. The important thing is not to just watch your organic traffic falling but understand how to adapt to the new world of search.
5. Global macro uncertainty
It may feel like we’ve been predicting global macro uncertainty for a few years now, but, unfortunately, we haven’t yet been wrong. While 2026 should be more measured in terms of inflation and economic shocks, the world still feels very uncertain when it comes to shifting alliances, the what-next on tariffs and supply chain impacts caused by geopolitical instability and climate shocks.
For SMEs reliant on exports or imports, it is likely that there will still be significant disruption over the next 12 months. SMEs must plan for volatility, diversifying their suppliers and end markets, and build financial buffers in their businesses to withstand shocks.
Conclusion
Can SMEs deliver tech transformation while battling rising costs? SMEs who stay agile and adapt to the new world have a real opportunity ahead – especially if they can find partners who can support them to outpace their competitors.
Insights
20/01/2026
5 biggest challenges for SMEs in 2026
2025 was a year of continued evolution and momentum for ECI as we delivered two exits with an average 3.1x return, raised our first Continuation Fund, completed two investments and two portfolio bolt-on acquisitions, and saw double-digit revenue and EBITDA growth across the portfolio.

We completed two strategic investments in Insurance Insider and CSL alongside two portfolio company bolt-on acquisitions. CSL acquired EdgeConnect, a multi-award-winning internet connectivity solutions specialist, while IGG's acquisition of KGC Associates further strengthened its governance offering to clients.

Portfolio companies delivered double-digit revenue and EBITDA growth in 2025, with international revenue now exceeding 50% of total revenue, representing 14% growth in the last 12 months. 2025 saw ECI hold two portfolio summits as part of its ECI Unlocked program, the Digital Growth Summit and Performance Summit, bringing together leadership teams to share insights and best practices.

We welcomed five new team members: Georgia, Ben, Neal, Simona, and an upcoming joiner in Investor Relations. The year also gave us the opportunity to celebrate Ash Patel's 25 years with ECI and Philip Shuttleworth's upcoming retirement after 30 years with us.



AI at ECI
ECI launched its AI Task Force (AITF) in 2025, a cross-functional committee providing centralised oversight for all AI-related activity across both ECI and delivering connectivity across the portfolio.
We also further enhanced our proprietary AI tool, Amplifind™, with the launch of Amplifind™360, to support our portfolio drive efficiency, visibility and collaboration across their M&A pipeline, and the launch of the Amplifind ™ Deep Research tool, transforming how we approach company analysis and market intelligence through AI agents across trusted sources.

ESG at ECI
In 2025, ECI became an EDCI signatory to enhance the robustness and transparency of portfolio ESG data. We also worked with our portfolio to improve carbon tracking, with 100% of our existing portfolio (companies in portfolio over 12 months) now tracking carbon data, providing a foundation for us to help them with decarbonisation initiatives. In 2025, we selected Wilderness Foundation as our charity partner, an organisation that uses nature-based therapy and outdoor learning to help vulnerable young people build resilience and improve mental health.

Insights
15/01/2026
Read Time: Min
ECI’s 2025 year in review
We're delighted to announce the exit of Peoplesafe, a global provider of workforce safety software products and services for lone workers and at-risk workers, to Summa Equity, generating a return of 2.7x since we first invested in the company in 2018.
Founded in 2001, Peoplesafe has more than 25 years of experience supporting employers and protecting lone and frontline workers in increasingly complex and hybrid work environments. It serves public and private sector customers across industry, healthcare, real estate, retail, utilities, and more.
Peoplesafe equips workers with real-time access to emergency support. Employees access the support through several integrated safety solutions including mobile apps, dedicated devices, and a 24/7 in-house Alarm Receiving Centre (ARC). These are all connected through Peoplesafe’s own software platforms, Nexus and Lighthouse. Over the past year, the company launched Travelsafe, a safety travel app for employees, and Apple Crash Detection to protect employees during work-related travel. They also introduced Roamsafe, so that employees can maintain connectivity even in low-signal areas. This has also supported AI features being launched by the business, including Alarm Intelligence, which seeks to expedite response and enhance health and safety reporting by summarising complex technical incident logs into digestible summaries. Increasingly, Peoplesafe also integrates directly into organisations HCM and workforce management platforms.
Advisors:
Baird: Corporate Finance
Squire Patton Boggs: Legal
PwC Strategy &: Commercial Due Diligence
PwC: Financial Due Diligence
Crosslake: Technology Due Diligence
Capstone: Regulatory Due Diligence
Liberty Corporate Finance: Management Advisory
News
13/01/2026
Read Time: 3 MINUTES
ECI exits Peoplesafe delivering a 2.7x return
Following a strong 12 months for the ECI team, we are pleased to announce two promotions as we enter 2026. These are:
Ludvig Hamilton is promoted to Investment Manager. Having joined ECI in 2024, Ludvig has already made a significant impact, supporting on the investment in Croud and the successful exit of CSL into a continuation fund in October 2025, generating a 3.5x return. Ludvig has also helped build ECI’s presence in the Nordics market.

Sam Veevers is promoted to Associate within the Origination team. Having also joined in 2024, Sam has played a key role in further developing and leveraging ECI’s proprietary AI-powered platform, Amplifind™, to enhance the firm’s deal origination capabilities. His work has helped ECI source, prioritise and assess leads more effectively, strengthening our ability to identify the best investment opportunities. He has also supported with the launch of Amplifind™360, leveraging the same technology to help our management teams with their own strategic M&A pipeline.

News
12/01/2026
ECI announces two promotions for 2026
How willing are UK business leaders to take risks? Nearly half of CEOs and business owners (47%) in the UK now say they are more willing to take risks than a year ago, according to research commissioned by ECI.
Although appetite varies sharply by sector, we see technology businesses the most confident, with 58% reporting a higher appetite for risk, followed by HR companies (57%). The research, which saw responses from over 300 business leaders in the UK, has also found that confidence increases with company size, with more than half (57%) of businesses with over 500 employees saying they are more open to risk than last year.
Cost pressures remain the dominant challenge
Despite improving sentiment, rising costs remain the single biggest concern for UK businesses, cited by one third of respondents. Digital transformation (14%), the perceived threat from AI (13%), and regulation and compliance (11%) also feature prominently.
Different sectors have also shown different priority levels when it comes to challenges. For healthcare businesses, digital transformation is front and centre (71%). Rising costs are a particular concern in technology (44%), while talent shortages are most acute in healthcare (40%).
Good prospects for private equity investment
The findings point to a robust outlook for private equity, with 57% of businesses currently considering PE investment, with interest being strongest among travel companies (69%) and technology businesses (67%).
International expansion firmly on the agenda
Confidence is also translating into ambition with 84% of medium-sized businesses now considering international expansion as a growth driver in 2026.
When it comes to funding international growth, private equity and venture capital come out on top (35%), ahead of government grants (26%) and bank finance (23%). Medium-sized companies surveyed are most likely to be considering private equity for international expansion (40%) with those in the travel industry particularly interested in using private equity to expand overseas (50%), followed by financial services (47%).
Businesses value expertise as much as capital
When asked about the benefits of private equity, respondents highlighted sector expertise and networks (32%) above all else, followed by technology and AI expertise (28%), international reach (18%) and access to talent (10%).
Tom Wrenn, Managing Partner at ECI, commented: “This research is what we like to see as investors – positive sentiment from UK business leaders with a renewed appetite for risk, especially amongst tech CEOs. What is particularly striking is the number of management teams actively considering private equity as they look to expand internationally and navigate the shifting sands of GenAI. We see this from the Founders and CEOs we speak with, who are looking for experience and expertise from their partner to navigate the growth opportunities ahead of them. Across five decades of investing, we’ve refined a repeatable value creation model, which is one reason many CEOs look to partner with ECI. The findings underline that businesses increasingly see PE as a strategic partner, not just capital.”
Insights
08/01/2026
UK business leaders show renewed appetite for risk as confidence returns
At ECI, we’ve met 1000s of CEOs and Founders and have partnered with over 250 of them. In that time, there are traits that we’ve seen which tend to be indicators of a successful partnership. These aren’t the sort of checklists you’ll see in management DD, but from our experience, these are common traits that we look for in the people we back.
1. Integrity and honesty
Transparency is a non-negotiable in business, and the most likely indicator that a partnership will fail is when trust breaks down.
CEOs might fear sharing bad news with their investor, but they really shouldn’t. We know from our experience that it’s a very rare investment that has a straight-line trajectory – we’re backing growth, and that can mean growing pains! The priority is that we solve problems together with the teams we’re working with – part of our role as a supportive investor is to help you navigate challenges.
We’re putting millions of pounds (of our investors' capital) in the trust that a leader is telling us the truth, and that we can trust them to deliver what they say. That means we need to have faith in their integrity to justify that conviction. When we interview CEOs about what is important to them, we often see this sentiment reflected back to us. They need to trust people in their team, and they need to trust their investor to back them and their plan. It’s the bedrock of successful growth.
2. Quietly ambitious
It will be unsurprising that ambition is a must-have for CEOs and Founders, but one thing that might surprise people who don’t work in business is that it probably looks different to how you expect. We rarely see the bell-ringing, self-congratulatory, champagne and personal brand-building type of ambition. Instead, while CEOs might like to celebrate milestones, a common trait we see is that as soon as a milestone is hit, they’re asking, “What’s next?”
This is important, as often when we invest, CEOs become millionaires overnight. The type of people we back tend to immediately refocus on how they can go on to double the size of their business, rather than taking their eye off the ball. It’s the vision of what you can achieve that is exciting. When we interviewed John-Paul Savant, CEO of ATG, about what motivates him, he said, “The motivation is building something that encompasses the fullness of what I envisage and turning it into a reality.”
3. Empowering leadership
Micromanagers rarely scale – empowering others is key to growth. This is something we see time and time again: the best leaders focus on finding people they can trust and allowing them to deliver. As an investor, this is super important, as if you’re in the weeds, it’s very hard to keep an eye on the more strategic parts of the role. But also, an empowering leader has a laser-like focus on the best talent, and that means we know they are going to build a team with exceptional people.
When we talked with Jesper With-Fogstrup, Group CEO at Moneypenny, at our recent ECI Unlocked Digital Growth Summit about the role of leadership in technological change, he described his role as CEO as a ‘Chief Unblocking Officer’. His role is to understand where there are roadblocks in the business and clear the path for individuals to deliver.
4. Curiosity and breadth of thinking
At ECI, we always like to spend time with leaders ahead of a deal, to really get to know them. These one-to-one conversations are more revealing as to what motivates them as CEO – it’s often family, a wider purpose, certain goals they’re keen to achieve.
These conversations also reveal something else – the types of questions they ask. And what we often see is an innate curiosity, whether that’s in our motivations, in tech change, in how industries are transforming, in other leaders and how they’ve delivered their own goals.
Mark Eastham, CEO of Avantia, puts this best when he says, “I believe a good leader is someone who asks the right questions rather than always having the right answers. It’s through curiosity and challenging assumptions that you drive progress and empower your team to find solutions.”
5. Decisiveness
Perfect decisions don’t exist. In fast-growth businesses, operating in a fast-evolving sector in a technologically changing world, waiting for the perfect decision can cost you.
The worst outcome? Leaders who feel like they need endless analysis to justify the route forward – this can lead to internal paralysis while competitors move ahead. On the other end of the spectrum, a leader who solely bases decisions on gut instinct is likely to fall foul of too many bad decisions, but strong CEOs balance data obsession with the confidence to cut through the noise and set a clear direction.
Insights
02/01/2026
Tom Wrenn
Read Time: Min
Five CEO traits most valued by investors
Stephen Roberts recently attended Unleash World 2025, the leading global HR tech conference exploring how AI is transforming talent, learning, and organisational design. The theme of the conference chimes with what we see in our own portfolio, including HR tech platforms, Ciphr and CMap: AI is reshaping the requirements of an HR function, as well as the expectations of the providers that serve it.
1. AI is first and foremost a people issue
AI is first and foremost a people issue, with businesses rapidly changing in terms of team size, shape, makeup and training needs – all placing a new set of demands on the HR function.
What CEOs want from the Chief People Officer is changing. CEOs are looking to reskill the talent they already have, hire the talent they need, and add AI assistants and agents to workflows wherever they can. HR needs to play a role in that. Change management, and specifically bringing people with you through the transition to AI, will become one of the key roles of HR.
2. The expectations of the workforce are changing
Alongside changing demands from CEOs, there are also rapidly changing expectations in the workforce, particularly in terms of UI/UX. Employees are increasingly used to the conversational interfaces of LLMs and don’t want to be playing ’whack-a-mole’ between multiple internal applications to perform tasks or gain insights. In time, all those systems will work together, with an orchestration layer connecting everything, and a reasoning layer making sense of the data to help employees get answers or complete tasks. So instead of logging into five tools, you’ll just ask one system, and it will handle the rest.
To work effectively, AI needs to provide insights grounded in accurate and compliant data. The fundamental requirement for a system of record isn’t diminishing. However, the employee is increasingly used to interacting with AI – there will be lots of shadow AI already in most businesses. If the HR team don’t deliver what they expect (and by extension, if existing HR tech doesn’t keep up with the expectations of the end user), then there will be wedge threats from new tools being used further down the business. If offerings aren’t augmented with AI (and automation in the case of payroll) then they will quickly become antiquated.
3. A hot market for AI-first HR tech startups, and lots of M&A…
In that context of reshaped requirements of HR, there have been vast amounts of VC money coming into parts of the HR tech stack, particularly into talent acquisition. The vast majority of these products are niche and are augmenting an existing process - making HR functions more efficient, but not necessarily transforming them (yet). Examples would be AI-driven CV screening or job description generation. The most interesting businesses are those that are creating new business models altogether – things that can’t be done by humans. There are fewer of these, but they are coming.
Whilst some of these businesses have incredible products, few have the customer base or trusted market positions of the incumbents. It therefore feels likely that M&A will be a theme of the coming years in HR tech, as incumbents buy rather than build more AI capability. These businesses are typically the system of record and/or payroll providers, and are sitting on significant amounts of cash, so acquiring AI sparkle to sell into their huge bases is an obvious augmentation of their growth strategies.
Indeed, it has already been an active period as businesses like Workday (Sana and Paradox) and SAP (Smart Recruiters) acquire.
4. Implications of AI on HR tech business models
The talk amongst vendors at Unleash was the impact on the broader business models – marketing, sales, customer success and service.
The attitude of the leadership team is crucial in this regard. AI is evolving rapidly, and the technology is improving quickly. This increases the speed of new ways of working and new business models emerging. The best teams will demonstrate humility, make it clear internally and externally that they don’t know everything, but there will be significant change to come, the business is starting from a strong position and has inherent competitive advantages but is going to need to learn and adapt in order to maintain that. Job transformation is inevitable but that creates new opportunities.
Incumbent HR tech providers need to emphasise the advantages they hold - the data they sit on, the domain experience (in product and go to market), scale, brand and longevity. Buyers will generally favour buying from trusted vendors, provided they are maintaining a competitive product.
For those that do adapt, AI should be seen as a massive opportunity, both in terms of revenue growth but also in reshaping businesses. Agentic AI should extend the remit of HR tech (and by extension the addressable market for businesses), creating stickier customers, driving more value out of their HR software. Failure to adapt will see the system of record becoming infrastructure, with the ‘action’ happening on top if it – the equivalent of the copper cables that the internet start-ups were built on top of. This is an exciting moment for HR tech firms rising to that challenge for their customers.
Insights
02/01/2026
Stephen Roberts
Read Time: Min
The double disruption: AI’s role in shaping HR functions and HR tech
As we settle into the quieter days of winter, it's the perfect time to curl up with a good book – whether you're by the fire, on a festive break, or simply enjoying some downtime before the year ahead. From thought-provoking non-fiction to brilliant storytelling, here's what the ECI team are reading this winter:

Neal Griffith
In Search of Thursday by Paul Traynor
This book, recommended to me by a former 3i employee, is about the early days of 3i and how it became a ‘University of Venture Capital’ for many in the private equity industry who went on to spin off their own firms. It follows Paul’s experience joining the VC world at the age of 25, and is part insightful, part incredibly amusing. It obviously interested me as I work in the industry, but the stories Paul tells and his style of writing make it far more laugh out loud than you might expect… One word of warning – some of these stories are not exactly appropriate so don’t take this review as endorsement. And for those considering joining the world of private equity now, if you read this I must stress that things are quite different now versus in the 1980s….. most things at least!

Louis Jans
Fourth Protocol by Frederick Forsyth
As ECI’s resident spy / secret agent book critic, I found myself looking for my next read. Thanks to ChatGPT I was introduced to Frederick Forsyth’s (also authored “The Day of the Jackal”) Fourth Protocol. Set during the 1987 UK general election where a hard-left faction is gaining popularity, Russian spies hatch a bold plan to discredit the Conservative government by deploying a next generation weapon on UK soil. The book follows the main actors from both the UK and Soviet side but it takes quite a while before both storylines converge, which makes it a very thrilling read and hard to put down. The story is a really nice blend between fiction and reality, grounded within real events and personas, so feels very realistic.

Fiona Moore
Not the End of the World by Hannah Ritchie
At times it can be quite doom and gloom working in ESG: ever closer critical deadlines, failures to miss targets, watering down, greenwashing, species wipe outs… the list goes on. Hannah Ritchie is a lead researcher at Our World in Data, and she wrote the book to combat that feeling of helplessness and doom and gloom. Rather than follow the headlines and the dramatic crisis calls, she zooms out and takes a look at the long term data to understand where we should focus our efforts and where we’ve already past monumental peaks. She challenges preconceptions around sustainability and calls out activities that might ‘feel’ good on the progress front but that aren’t really moving the needle. I finished the book feeling optimistic, not just about the steps forwards that we can take but also about how much has already been achieved.

Isa Maidan
Headshot by Rita Bullwinkel
Headshot is a debut novel following eight girl boxers in the US over the two days of a championship. The reason this stood out to me is compared to anything else I’ve read, is it had an incredibly unique structure, with each chapter dedicated to one of the bouts in the tournament. This way of presenting the narrative gives a real feel of intimacy to the competition. The author cleverly weaves the girls’ pasts and futures into the fights, what’s driving them and how their upbring affects their approach in the ring. As the reader you get to know and start rooting for each of them. The characters can be raw and messy – many have got into fighting for very real and often painful reasons. This rawness is reflected in the writing style which takes you into the ring with them, with all the intensity, heat and pain of each fight.

Toby Fitzherbert
Operation Mincemeat by Ben Macintyre
There seems to be a cultural moment of this story recently, with both a musical and a Colin Firth film about it in the last five years. This isn’t surprising as it is a story that is so fantastical it is hard to believe it all happened. The book follows the planned deception of German troops convincing them that the planned invasion of Sicily was in fact a hoax. Doing so probably saved thousands of lives, but the way it was done reads like the fabrication of a thriller writer. I really enjoyed discovering the story, and won’t spoil it for people, but if you did want any Christmas gift ideas, this is one of those books you read and immediately start gifting to people you know!
Insights
09/12/2025
What are ECI reading? Our winter 2025 reading list
