For UK SMEs, internationalisation in 2025 was about recovery and cautious expansion. In 2026, it is about structural redesign and resilience.
The shift is subtle — but significant.
Internationalisation strategy has moved from growth-driven ambition to system-level preparation.
Here is what has changed — and why it matters.
From Growth Opportunity to Risk Management Strategy
Internationalisation in 2025 was largely framed as a response to weak UK domestic demand, but also a growth lever and a way to diversify revenues or create new revenue streams. SME asked: What can we do next, or where can we sell next?
The question has now changed. In 2026, SMEs are asking, “Can our business survive cross-border complexity?”
With continued tariff uncertainty, regulatory fragmentation, and supply chain vulnerability, internationalisation is no longer optional growth — it is risk mitigation.
In 2026, the internationalisation strategy is about:
- Diversifying geopolitical exposure
- Protecting margins from domestic stagnation
- Reducing dependency on one market
International expansion has become structural, not opportunistic.
Logistics Has Moved to the Centre of Strategy
In 2025, logistics was acknowledged as important. Disruptions due to tariffs, brexit and steep increases in production and distribution costs, and labour costs.
In 2026, logistics is strategic. Post-Brexit trade friction has stabilised, although not disappeared.
SMEs now recognise:
- VAT timing affects cash flow more than marketing spend
- Excise duties can destroy margin models
- Delivery transparency determines customer trust
- Incoterms shape profitability
Many UK e-commerce businesses learned in 2025 that selling into the EU without modelling total landed cost leads to customer dissatisfaction and silent margin erosion.
In 2026, we are seeing:
- Increased use of EU-based fulfilment hubs
- More DDP (Delivered Duty Paid) pricing strategies
- Greater pricing discipline
- Structured VAT compliance planning
Logistics is no longer operational. It is foundational to internationalisation.
Another important aspect that we need to consider is AI that has moved from being an experimental addition to SME workings to a trusted partner if well structured and clearly implemented.
AI has transformed international market research. Nevertheless, it has also streamlined much of the work that SMEs currently handle. AI can be used in content creation (including highly effective ads), data clustering, predictive analytics and automatedemand forecasting. AI is not going to replace strategic thinking. Nevertheless, it will support it, optimise it and support implementation.
The SMEs that succeed internationally in 2026 combine AI-driven insights with disciplined structural planning and innovation-driven strategy.
China–Europe Trade in 2026: What Has Changed — and Where UK SMEs Actually Fit
The Pulse has had reviews and analyses of China-based SMEs and their own challenges; we have also talked about the important role that China plays as a strategic partner. However, we live in very challenging times.
Tariffs, geopolitical instability and rising costs have been amongst the most challenging factors in 2025, and they have, in most cases, hindered internationalisation for smaller players.
What shall we expect in 2026? The China–Europe corridor is no longer simply about cost arbitrage. We are increasingly seeing this relationship being focused on strategic positioning within a politically sensitive, regulation-heavy trade environment.
Let’s unpack what has changed since the last time we talked about internationalisation toward China— and where UK SMEs realistically contribute.
Political Sensitivity
There is no blanket trade war between China and Europe, but there is increased political sensitivity. The EU has intensified scrutiny of certain Chinese imports, anti-dumping investigations continue in strategic sectors, and supply chain decisions are now influenced as much by geopolitics as by cost.
For UK SMEs exporting to China, the friction is rarely headline tariffs, but it is all about administration. This means that:
Luxury goods typically face import duties plus VAT.
Food and beverage products face strict certification and labelling compliance.
Customs documentation must be precise.
Logistics (again)
At the cost of sounding like a broken record, let’s not forget that bilateral procedures apply because the UK no longer trades under the EU framework.
The friction is administrative and logistical rather than prohibitive. Nevertheless, whoever has worked for an SME knows quite well that administration is a cost. Extra time managing multi-country requirements, customs liaisons and so on. Administration costs to cover all logistics requirements can be quite costly for SMEs.
Freight rates have stabilised compared to the volatility of previous years, but remain structurally higher than pre-pandemic levels. Air freight is expensive for small-volume exporters, and cross-border e-commerce into mainland China is tightly regulated. Hong Kong continues to function as a more flexible entry point.
At the same time, China is no longer simply “cheap manufacturing.” Labour costs have risen, regulatory requirements have tightened, and the ultra-low-cost advantage is narrower than it was a decade ago — although scale efficiency still dominates in mass production.
This leads to the real strategic question:
If so much is cheaper in China, what can UK SMEs realistically contribute? UK SMEs cannot compete on volume manufacturing or commodity goods, and they shouldn’t even try. The competitive advantage lies in differentiation. The UK SMEs win on intellectual property, heritage, design, trust, and niche specialisation.
For micro businesses and solo entrepreneurs in particular, China in 2026 should not be treated as a first-step export market. It is rarely efficient to enter directly without scale, infrastructure, or strong local partnerships.
Instead, China is better understood as:
- A long-term brand positioning play
- A prestige market
- A licensing market
- A partnership market
For many UK SMEs — especially in technological innovation, boutique luxury, hospitality concepts, and premium food and beverage — the more viable strategy is asset-light:
- Licensing technology.
- Franchising concepts.
- Working through established importers.
- Using Hong Kong or international buyer networks.
- Building brand visibility before physical distribution.
Internationalisation in 2026 is not about competing where China is strongest, but where UK SMEs are structurally differentiated.
Conclusion: A More Realistic View of Internationalisation
If 2025 was about reopening doors and testing what was possible, 2026 feels different.
Over the past year, many UK SMEs have learned the hard way that exporting without structure creates hidden pressure. VAT timing affects working capital. Logistics costs quietly eat into margins. Administrative complexity takes time away from strategy. And in markets like China, what looks like an opportunity on paper quickly becomes operationally heavy in practice.
At the same time, the opportunity has not disappeared. It has simply become more selective. Amongst all the possible Internationalisation avenues, China is still important. Nevertheless, Asia -and China specifically- cannot be seen as a shortcut to scale. Europe is still accessible — but not frictionless. AI is powerful — but not strategic on its own.
In 2026, let’s think about “fit”: between margins and logistics, between products and regulatory environments and market size.
For micro businesses and small innovative firms, this often means resisting the temptation to compete on cost or volume. That battle is already won by scale manufacturers. The strength of UK SMEs lies elsewhere — in intellectual property, design, heritage, specialist knowledge, and the ability to operate in niches that larger players overlook.
Internationalisation today is less about asking “Where can we sell?” and more about asking “Are we ready to operate there properly?” That shift may feel subtle, but it changes everything.
The businesses that will move confidently through 2026 are not necessarily the most aggressive. They are the ones that understand their structure, protect their margins, choose their markets carefully, and build partnerships where scale is required.
