Enginuity launches second SME Snapshot Report highlighting ongoing skills and cost pressures

Enginuity has today published its second SME Snapshot Report, offering fresh insight into the health, outlook and skills challenges facing the UK’s engineering and manufacturing SMEs. 

Commissioned by The Policy Centre for Supply Chain and SMEs: Powered by Enginuity, the report builds on the inaugural study released in July 2025. This latest edition reflects a significant increase in engagement, with more than 250 SMEs contributing, representing over 10,000 employees and £1.91 billion in revenue. For the first time, the research enables trend analysis, providing a clearer picture of how recent policy reforms and economic pressures are affecting businesses on the ground. 

A growing evidence base for SME voices 

The SME Snapshot Survey is a core part of Enginuity’s work to ensure the experiences of SMEs are understood by policymakers and industry leaders. With participation increasing by almost 90% since the first report, the findings underline the importance of continued engagement at a time of major change in the skills system. 

SMEs remain central to the UK economy, making up 99% of all businesses and over 90% in engineering and manufacturing, highlighting the importance of ensuring policy works for this critical group. 

Mixed outlook amid ongoing challenges 

The latest findings paint a mixed picture of business confidence and economic pressure: 

• 53% of SMEs say they are optimistic about the year ahead. 
• 60% report increased pessimism following the Autumn Budget 2025.  
• Labour costs remain the primary driver of price increases. 

While optimism has improved since the previous report, many businesses continue to face a difficult operating environment, with rising costs and uncertainty impacting decision-making. 

Persistent skills shortages are impacting growth 

Recruitment challenges remain widespread, reinforcing concerns that the current skills system is not meeting employer needs: 

• 60% of SMEs attempted to recruit in the past six months.  
• Of those, 80% experienced difficulties finding suitable candidates.  
• 60% cite a lack of technical qualifications as the main cause of skills gaps. 

These findings highlight the ongoing mismatch between training provision and labour market demand, with direct consequences for productivity and growth. 

Navigating a changing skills landscape 

The report comes at a time of significant reform to the UK’s skills system, including changes to apprenticeships, qualifications and governance. While SMEs welcome the Government’s focus on skills as a driver of opportunity and growth, the pace and complexity of reform risk overwhelming businesses without sufficient support. 

Ensuring that SMEs can access, understand and benefit from these changes will be critical to their success and to the wider economy. 

Cathryn Moses-Stone, Senior Policy and Public Affairs Manager at Enginuity and one of the report's authors, commented: “SMEs are the backbone of UK engineering and manufacturing, but they are continuing to face a tough mix of rising costs and persistent skills shortages. This report highlights both the resilience of these businesses and the urgent need for a skills system that truly works for them. As reforms progress, ensuring SMEs can engage with and benefit from these changes will be critical to driving growth.” 

Driving insight, influence and impact 

The Snapshot Survey and Report is a key part of The Policy Centre for Supply Chain and SMEs: Powered by Enginuity, which unifies and amplifies the voice of the UK’s manufacturing and engineering businesses.  

As an independent voice, The Policy Centre for Supply Chain and SMEs brings together industry, government, policy organisations, and industry representative bodies to support the engineering and manufacturing sector. It convenes businesses to identify shared challenges and opportunities, from skills gaps to productivity, while amplifying the collective voice of SMEs. Through partnership, influence, and innovation, it aims to drive and deliver lasting impact across the sector. 

Read the full report to explore the findings and recommendations in detail Find out more about The Policy Centre for Supply Chain and SMEs: Powered by Enginuity