Coping with economic uncertainty
Practical advice for small businesses in the UK
It’s been a difficult few years for small independent businesses in the sport and physical activity sector – the famine of the pandemic then the feast of people looking to improve their fitness and wellbeing, followed by a cost-of-living crisis limiting household spending. Most businesses have already embraced change to survive this turbulent environment, but the recent economic climate is proving particularly challenging for many.
As increased global tensions continue to impact both domestic and operating costs, many people in the UK, customers and business owners alike are thinking hard about what they spend their money on.
For SMEs, a problem-focused approach is a great way to navigate the current complex economic landscape and below are some pointers to help steer your course.
The climate
Over the last 12 months, the economic climate facing small businesses in the UK has become increasingly complicated. Continued global instability, namely the effect on oil and gas prices as well as imported goods, caused the Bank of England to hold interest rates in April in response to higher than anticipated inflation. For many businesses expecting a cut to the rates, this was a less than desirable outcome. These increased energy costs are also adding financial pressure to energy-intensive venues such as swimming pools and gyms, who are then passing this cost on to their customers.
At home, many people are looking at their household budgets and weighing up which services are simply transactional against those which are beneficial and feel valuable. The UK Health and Fitness Market Report 2026 by ukactive recorded 679 million visits to health and fitness gyms in 2025, a 10.3% increase on the year before, and total membership income has risen to £5.7 billion. So, whilst people aren’t currently rushing to cancel their gym membership or stop going to group classes, they may consider it if they don’t feel they’re getting value for money.
The report highlights that demand within the sector is continuing to grow, and SMEs can capitalise on this by taking a locally focused and flexible approach to their offer whilst carefully managing any rising operational costs.
Adapt
If your business employs people (full-time, part-time or temporarily), the last 12 months have brought some significant changes to employment costs and law that it’s important to ensure you understand and are able to adapt to.
National Living Wage
From April 2026, the National Living Wage rose from £12.21 to £12.71 per hour for workers aged 21 and over (up 4.1% from 2025). Younger workers saw bigger rises, with 18 to 20-year-olds receiving £10.85 per hour (up 8.5%), and 16 to 17-year-olds £8 per hour (up 5.9%). If your business relies heavily on younger members of staff, these increases will be having an impact on your payroll.
Employer National Insurance
In April 2025, employer NIC rates rose from 13.8% to 15%, and the threshold at which you start paying dropped to £5,000 per year, per employee. If you’re a business with multiple staff, these changes are felt more by you, the employer, because now more of each employee’s pay attracts NICs and this further compounds payroll costs.
Employment Allowance
To protect smaller businesses from the increase in National Insurance, in April 2025 the Employment Allowance was also increased from £5,000 to £10,500. Gov.UK says “you’ll pay less employers’ Class 1 National Insurance each time you run your payroll until the £10,500 has gone or the tax year ends (whichever is sooner)”.
Employment Rights Act 2025
This legislation has brought significant changes to employee’s rights, including ending exploitative zero hours contracts, unscrupulous ‘fire and rehire’ practices, day-one rights including statutory sick pay (SSP), paternity leave and unpaid parental leave and enhanced flexible working rights. These changes may require you to review how you structure your temporary or sessional staff.
Next steps:
- Review your payroll against the new rates
- Check your Employment Allowance claim
- Review contracts under the new Employment Rights Act 2025
Invest
When operating costs rise and income feels uncertain, most businesses instinct is to tighten their belt. Additional training is often the first thing to cut back on and whilst this feels like an obvious choice, it can be a quick fix when a longer-term approach is needed.
Research carried out by CIPD (Chartered Institute of Personnel and Development) suggests that businesses who invest in their people consistently outperform those that don’t. Staff who feel valued and developed work harder, stay longer and deliver a better experience to customers. The quality and experience of your coaches, instructors and support staff is what your customers are paying for, so why stop investing in that?
Invest in your people
Continuing professional development (CPD) doesn’t have to be expensive. CIMSPA signposts to a wide range of affordable training and resources, whilst governing bodies provide subsidised or free CPD for qualified practitioners. Free government-backed training programmes are also worth exploring via the Skills for Careers website or Free Courses In England.
Invest in yourself
For your own development as a business owner, the value of peer networks shouldn’t be underestimated. Networking with other SME owners through CIMSPA’s local skills accountability boards or other local business networks, gives you access to people in the same situation as you but who might have new ideas and experience to share as well as support to offer. These groups can often be joined for little or no cost.
Mental health and wellbeing
The rise in mental health issues in the UK over recent years means the likelihood of coming into contact with a customer experiencing mental health difficulties has increased. Another way to upskill your team whilst also enhancing your offer is to take part in Mental Health First Aid training. Available for around £325 per person for the MHFA qualification, this is an investment in your team’s resilience to challenging situations and a reassuring sign to your customers.
Train to retain
Recruiting and onboarding a replacement staff member is estimated to cost between 30–50% above the salary figure, when you consider advertising, time spent interviewing, onboarding and the gap in service during recruiting. Investing by upskilling the people you already have is almost always cheaper than replacing them, and people who feel their employer is invested in their future and development are less likely to look for other employment.
Next steps:
- Help and direct your staff towards training and CPD
- Look locally for peer networking opportunities
- Consider whether Mental Health First Aid could be right for your business
Specialise
When disposable income starts to decline, unfortunately it’s the generalist services that people let go first. Not because offering a wide variety of options to customers isn’t useful, but because specialist services are deeply focused on solving a specific problem a customer has.
This is where small, independent, locally focused businesses have a genuine competitive advantage over larger organisations more dominant in their field. You can specialise in ways that a bigger company cannot.
Find your niche
Start by talking to your customers. Do some light research to understand their needs – this should give you a good indication of what’s in demand from the people already using your business. Don’t presume to know what people want and think carefully about what you could realistically become more expert at. Some areas you could consider:
- Children and young adults – with around 30% of UK children are classed as inactive according to a report by SportEngland, services which promote physical literacy are seeing a rise in demand
- Pre- and post-natal exercise – a life stage where women actively seek qualified, specialist support.
- Rehabilitation – working to support people managing long term conditions or recovering from injury
- Mental health and wellbeing – as previously mentioned the number of people experiencing mental health difficulties is rising, public awareness is high, and the NHS is increasingly looking for community partners to share the load.
- Mature adults – the UK currently has an aging population, more aware of their health and retaining independence seeking professional guidance.
CIMSPA can help you identify which qualifications are required to achieve a specialist professional standard, while initiatives like Sport England’s The Movement Fund or the Go Far Fund offer grants that may provide additional financial support if your proposed services qualify.
Know your value
You’ve found your niche and undertaken the necessary training to specialised in your chosen area, now it’s time to consider your pricing structure. A well-qualified specialist can usually charge more for their services. Start by undertaking a bench marking exercise with other businesses offering a similar service in your area, what do they charge? This approach should ensure you don’t price yourself out of the market and give you confidence to communicate your value clearly.
Next steps:
- Find out what your customers’ needs are
- Take action to specialise in your chosen niche
- Review your pricing structure
Looking ahead
There’s no denying that it’s a tough climate at the moment for small, independent sport and physical activity businesses. But those who take a problem focused approach are more likely to weather the conditions than those who try to grit their teeth and bear it.
Understand your obligations as an employer – adapt contracts to ensure you’re complying with employment cost and law changes.
Invest in your people and yourself – CPD and local networking could help expand horizons for you and your team.
Become a specialist – find out what your community needs and what you’re ideally placed to do for them.
The sport and physical activity sector generates an estimated £122.9 billion in social value annually and we know from research that demand for sport and fitness continues to grow despite increased financial demands on UK households.
It’s time to adapt, invest and specialise to ensure your business stays as fit and healthy as the community you serve.
