Five years after the first COVID-19 lockdown, Britain's small businesses have emerged not just changed, but transformed, according to new research from Funding Circle.

An overwhelming 92% of small and medium-sized enterprises (SMEs) that altered their business models during the pandemic have made those changes permanent. Whether shifting to new customer bases, embracing technology or rolling out new services, these businesses have turned short-term survival strategies into lasting blueprints for success.

“The COVID-19 lockdown threw a whole host of unprecedented challenges our way,” said Vik Gubskis, owner of 8 Rocks Deli & Wine. “We acted quickly, pivoting to takeaway and home delivery services. Ultimately, that experience has left us more prepared for the future.” Gubskis said his business has since grown its team and diversified its revenue streams.

Technology has emerged as a critical driver of this transformation. Nearly half (47%) of SMEs are now prioritising digital investment over physical expansion, with many adopting new systems that enable long-term planning and agility. In fact, 63% of business leaders reported changing their entire approach to planning, strategy and decision-making since the pandemic.

Funding Circle’s CEO Lisa Jacobs said the findings reveal “the enduring resilience, entrepreneurialism and determination to succeed” that characterises small businesses across Britain. “Five years on from lockdown, SME Britain has fundamentally changed – short-term adaptations have become permanent and profitable,” she said. “The digital-first mindset that emerged during COVID-19 is now a permanent feature of SME strategy.”

Importantly, the experience of navigating the pandemic has left SMEs better equipped for future challenges. Six in ten report being more resilient to economic shocks, from inflation and geopolitical tensions to supply chain disruptions. More than a third (38%) specifically cited greater confidence in handling supply chain volatility.

Looking ahead, optimism is rising. Two-thirds (65%) of SMEs expect to grow in 2025, with almost half (43%) more confident than they were this time last year. However, financial strategies have shifted: three-quarters (74%) of SMEs have increased their appetite for short-term financing to preserve cash flow, and 61% report a greater need for business loans.