Outsourced Finance & Recruitment: Why UK SMEs Are Turning to Fractional FDs in 2025

By Jonathan Wheeler, Managing Director, EFM and Nils Lloyd-Penny, Operations & Recruitment Director, EFM

Across the UK, a quiet transformation is underway in how small and mid-sized businesses structure their finance teams. Faced with rising costs, talent shortages and unpredictable trading conditions, many are moving away from traditional full-time hiring and toward fractional and outsourced finance leadership, supported by smarter, more flexible recruitment strategies.

What was once considered an interim fix is fast becoming a strategic choice.

The pressures reshaping finance recruitment

The recruitment landscape is changing fast.

In the past year, job boards have recorded the lowest number of permanent finance roles advertised in a decade, reflecting both market uncertainty and a growing reluctance among employers to commit to full-time hires.

According to Nils Lloyd-Penny, Operations Director at EFM, this shift has been striking:

“Whenever the permanent market dips, we see a clear rise in demand for part-time, interim and fractional resources. Businesses still need expertise; they just want flexibility.”

At the same time, the scope of the modern finance function is expanding. Today’s finance leaders are expected to oversee not just numbers, but also digital transformation, funding strategy and governance. For many SMEs, hiring one full-time person to cover it all is neither practical nor affordable.

This combination of talent scarcity, complexity and cost pressure is driving demand for flexible models, especially fractional FDs and CFOs who can bring senior expertise into a business on a part-time basis.

Defining “fractional” and why it is gaining traction

“Fractional” has become one of the buzzwords of the decade, but as Jon Wheeler, Managing Director of EFM, notes, it is not as complicated as it sounds:

“Fractional, to cut across the jargon, just means part-time. It is a flexible way for businesses to access experienced FDs and CFOs without the full-time cost.”

EFM’s nationwide network of over 60 senior finance professionals is built around that principle, providing hands-on finance leadership to SMEs for anything from a few hours a month to a few days a week. The flexibility allows business owners to access seasoned strategic expertise without committing to permanent overheads.

As Jon adds:

“The beauty is in the flexibility. You can start small, increase support as your business grows and maintain that relationship long term. Many of our clients have worked with the same FD for years.”

The data behind the trend

The rise of fractional leadership is not anecdotal.

LinkedIn data shows that the number of UK professionals referencing “fractional” roles on their profiles has surged from around 2,000 in 2022 to more than 110,000 in 2024.

At the same time, macroeconomic factors, from inflation and interest rate volatility to persistent skills shortages, have made outsourcing high-level finance work a logical and lower-risk alternative for many businesses.

In short, fractional finance has matured from a temporary stopgap into a core talent strategy.

Recruitment and outsourcing: partners, not opposites

A common misconception is that outsourcing replaces recruitment.

In practice, the most effective approach blends the two.

EFM’s dual model combines outsourced and fractional support with specialist recruitment services, helping business owners bridge immediate gaps while planning for the long term.

As Nils explains:

“What we often see is that a business needs senior input now, but the right permanent hire might be six or nine months away. A fractional FD gives you that breathing room. They can steady the ship and then help define the permanent roles you will need next.”

By engaging an experienced fractional FD early, businesses can avoid rushed recruitment, improve their financial reporting and create a more informed brief for future hires.

Why business owners are making the switch

For many SMEs, the appeal of fractional and outsourced finance is both strategic and practical:

• Cost efficiency: Access top-tier expertise for a fraction of the cost of a full-time FD or CFO.
• Speed: Fractional and interim roles can be filled within weeks rather than months.
• Scalability: Support can flex up or down depending on projects, funding cycles or growth stages.
• Continuity: Many fractional FDs work with clients over long periods, providing consistent and embedded support.

Jon highlights another aspect that often resonates with business owners:

“What really matters in these relationships is continuity and understanding. Some clients stay with their fractional FD for many years because the support grows with the business. It is about building trust and delivering ongoing value.”

The advantage of network-backed fractional finance support

As fractional and outsourced finance becomes more widely adopted, an important distinction is emerging between standalone fractional professionals and those who operate within an established network.

For many SMEs, this difference has a meaningful impact on the level of support they receive.

Working with a network-backed fractional FD or CFO means gaining access to far more than the expertise of one individual. Behind them sits a wider team, offering additional finance capacity when workloads spike, specialist technical knowledge and links to complementary services such as tax, legal, HR and funding support.

This structure ensures continuity, resilience and breadth of capability that a single consultant cannot easily replicate. For business owners navigating complex decisions, growth or periods of change, the reassurance of an experienced FD supported by a broader ecosystem provides both flexibility and stability.

It is a model that combines personal relationships with institutional strength and gives SMEs confidence that the right expertise will always be available when they need it.

Beyond turnover: focus on trajectory

A frequent misconception among business owners is that the need for finance leadership scales with turnover. It scales with complexity and ambition.

As Jon observes:

“A £500,000 business acquiring another company may need more financial input than a £5 million business in a steady state. It is about where the business is going, not just how big it is.”

This nuanced understanding of business stages and the corresponding resource mix, lies at the heart of EFM’s approach. A start-up might begin with outsourced bookkeeping, evolve to a fractional FD during growth and later use EFM’s recruitment team to build a permanent in-house finance structure.

A dual strategy for modern finance

The future of finance leadership will be hybrid, combining the agility of outsourcing with the stability of targeted recruitment. Businesses that view these as complementary rather than competing strategies will build stronger and more adaptable teams.

As Nils puts it:

“The best outcomes come when outsourced, interim and permanent finance resources are aligned to the business plan, not treated as separate decisions.”

This joined up approach is becoming essential for SMEs seeking investment, preparing for exit or navigating rapid change.

The takeaway for business owners

Fractional and outsourced finance are not simply trends.

They are a response to deeper shifts in how organisations deploy talent and manage risk. For UK SMEs, the combination of tight labour markets, increased complexity and flexible working norms has made full-time finance hires feel less like a default and more like a choice among many.

By blending fractional finance leadership with strategic recruitment, and by choosing network-backed professionals with access to broader expertise, businesses can scale with confidence. They gain both the insight of an experienced FD today and the stability of a well-planned finance team tomorrow.

“Think about your next 12 months and your next five years,” advises Jon. “What do you want to achieve, and what financial capability will you need to get there?”

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