At the start of 2024, there were 5.45 million small businesses in the UK. This number increased at the start of 2025, and it’s expected to grow again by the start of 2026. With more people wanting to be their own boss and create some extra pocket money, small businesses continue to boom in the UK.

Setting up a business is an exciting time. However, while there’s so much to get excited about, there are still risks involved when setting up a new business. Many business owners think risk management is something only large corporations need to worry about. In reality, small businesses are often more exposed.

A single mistake or legal claim can have devastating consequences when resources are limited. Fortunately, with a proactive approach and the right protections in place, most risks can be managed. Below are some of the most common risks small businesses should prepare for in 2026, along with how to protect against them.

1. Client disputes

For small businesses that provide expert advice, a simple oversight could be the end of your career. A missed deadline, a financial error, or a design flaw could lead to a costly client claim. Professional mistakes are among the most frequent causes of financial loss for small businesses.

That’s where professional indemnity insurance comes in. It protects you if a client alleges that your work caused them financial harm, covering legal fees and potential compensation. Including this cover in your business plan is a smart move for consultants, designers, accountants, and any professional offering advice or specialist services. While it’s not nice to think of this outcome, it’s best to be prepared!

2. Cybersecurity breaches

Digital transformation has brought huge benefits to small businesses, but it’s also opened new doors for hackers. Phishing scams, data breaches, and ransomware attacks are on the rise. Even a minor breach can damage your reputation and cost thousands in recovery expenses.

Investing in strong cybersecurity measures is essential. These measures could include multi-factor authentication and encrypted backups. It should go without saying, but strong passwords, laptop locks, and employee training on cyber threats are all essential for cybersecurity.

3. Legal requirements

You might think that small businesses don’t have much responsibility compared to large corporations, but you’d be wrong. From GDPR to employment regulations, failing to stay up to date can result in substantial fines for any business.

Regularly reviewing your compliance obligations will not only save your business money but also time and stress. Businesses that don’t comply with GDPR can be fined up to $20 million. Plus, employers’ liability insurance is a legal requirement in the UK – even if you only employ one person. This insurance can start as low as £4 a month, so it shouldn’t break the bank for any smart business owners.

4. Property damage

Many businesses don’t have physical locations anymore. With the rise of remote working and online capabilities, the risk of offices and physical shops might not seem as relevant. However, these aren’t the only things you need to protect.

Several businesses rely on tools to provide their services. Insuring these tools will help you get back to work promptly and avoid income loss. If you do have physical locations as part of your business, it’s important to remember that fire, flooding, or theft can easily halt business overnight. The right insurance is key to protecting yourself against the unpredictable.

Secure today to thrive tomorrow

Every business faces risks. But with a little preparation, you can turn those risks into manageable challenges, rather than costly surprises. By following the suggestions in this blog, small businesses can build resilience in 2026 and beyond.

Being proactive about protection isn’t just about ticking a compliance box; it’s about ensuring your business can grow confidently, no matter what the year brings. Peace of mind is one investment no business can afford to skip.