The escalating threat environment
According to the Chartered Institute of Internal Auditors, cybersecurity and data security was identified as the single greatest risk for businesses in 2026, with over 80% of internal auditors in the UK and Europe flagging it as a top threat. This isn’t hyperbole – it’s an evidence-based assessment of where business risk is concentrating.
The UK cybersecurity market is projected to grow at a compound annual growth rate of around 10.5% through to 2033, reflecting both the escalating threat and the business investment required to address it.
AI transforms both attack and defence
Over half of European IT professionals believe AI-driven cyber threats will be the top concern for 2026, yet only 14% feel very prepared to handle them. This preparation gap represents existential risk for many businesses.
Attackers may deploy autonomous AI-agents, deep-fake phishing, adaptive malware or supply-chain exploits at scale, requiring defences to evolve from “we’ll respond when attacked” to “we anticipate and pre-empt attack”. Reactive security models are becoming obsolete.
The good news? AI strengthens defence as well as attack. Businesses deploying AI-powered threat detection, automated response systems, and predictive security analytics gain significant advantages. The question is whether your AI adoption outpaces attackers’ AI use.
The persistent threat vectors
In Q1 2025, phishing accounted for 53% of cybersecurity attacks suffered by UK SMEs, with 37% due to stolen or lost credentials and 30% due to too many permissions. These aren’t sophisticated zero-day exploits – they’re basic attacks succeeding because fundamentals aren’t properly addressed.
In Q1 2025, 29% of cybersecurity attacks were attributed to AI, a slight increase from 25% in Q3 2024. AI-powered attacks are growing but haven’t yet dominated – the window to prepare is now, not after they become overwhelming.
Supply chain vulnerabilities multiply
By 2026, supply-chain attacks will continue to grow in sophistication and impact, with UK reports showing many firms are under-prepared for third-party intrusions. Your security is only as strong as your weakest supplier’s security.
In Q1 2025, 55% of UK SMEs discovered employees using applications outside of those officially managed by IT, with 83% estimating employees are using between one and 20 unsanctioned applications. This “shadow IT” creates unmonitored attack surfaces that sophisticated threat actors exploit systematically.
The shift to proactive security
In 2026, the paradigm is shifting from “react when breached” to “detect and prevent early”, with proactive and pre-emptive security accounting for a significant portion of security spending going forward, including adoption of Zero Trust models, continuous monitoring, automation and rapid incident-response capabilities.
Zero Trust architecture assumes breach is inevitable and therefore requires continuous verification of every user, device, and connection. This represents fundamental rethinking of security architecture but provides dramatically improved protection.
Investment priorities for 2026
Over half of UK SMEs (52%) are prioritising investment in cybersecurity tools and services in the next six months – more than anything else, with 76% expecting cybersecurity budgets to rise in the next 12 months. If you’re not planning budget increases for cybersecurity, you’re an outlier in a dangerous way.
The primary reason UK SMEs use Managed Service Providers is system security (53%), with 61% saying cybersecurity is the one aspect they would like their MSPs to manage that they do not manage today. For many SMEs, outsourcing to specialists provides better protection than attempting to build internal expertise.
Practical steps for 2026 preparation
Conduct comprehensive risk assessment. Map your supplier ecosystem and rate third-party risk accordingly, expanding risk assessment to include vendor ecosystems not just direct systems. Understanding your attack surface is the foundation of protecting it.
Implement multi-factor authentication universally. 85% of UK SMEs either agree or strongly agree that their organisation’s security posture would be stronger if they required biometric authentication, with 62% saying the best tool for security is biometrics, followed by MFA at 43%. This is low-cost, high-impact protection.
Address shadow IT systematically. 87% of UK SMEs are very concerned or somewhat concerned about shadow IT use. Create approved alternatives that balance security with functionality rather than simply prohibiting unauthorised tools.
Build AI-aware threat models. Build AI-aware threat models and include them in your next cybersecurity strategy review, considering external expertise to validate whether your AI use-cases expose you to new vulnerabilities. Every AI tool you deploy creates potential attack vectors.
Establish board-level oversight. Cybersecurity cannot be delegated entirely to IT. Board and senior management must understand the risk, allocate appropriate resources, and monitor effectiveness actively.
Test your incident response. Train staff and rehearse incident response, testing your playbooks regularly. When breach occurs – and you should assume it will – practiced response dramatically reduces impact.
Measuring what matters
Set key metrics for 2026: Mean Time to Detect (MTTD), Mean Time to Respond (MTTR), number of high-risk vulnerabilities closed. What gets measured gets managed. Establish baselines now and track improvement.
The strategic perspective
Cybersecurity investment isn’t optional overhead – it’s business continuity insurance. A single serious breach can destroy customer trust, trigger regulatory penalties, and cause operational paralysis for weeks or months.
At FMY Chartered Accountants, we work with clients to assess cybersecurity risk from a business perspective, ensuring investment is appropriate to actual risk exposure. Our role isn’t implementing technical solutions but helping you understand what level of cybersecurity investment makes business sense and holding IT suppliers accountable for delivering protection commensurate with that investment.
The threat landscape in 2026 will be fundamentally different from today. Preparation now protects your business tomorrow.
Contact FMY Accountants today at info@fmyaccountants.co.uk for tailored advice and a personalised plan for your business.