Stress had a noticeable impact on businesses in 2012, according to nearly half (42%) of senior managers of SMEs, Zurich has found.
The insurer's quarterly SME Risk Index noted the negative effect of stress levels, low morale and staff absence will continue unless the economic environment improves.
While 29% of SMEs state these issues are having a negative impact on overall business performance, a fifth (19%) of SMEs said workforce absence levels have risen over the past two years, with 12% reporting more short-term stress-related absences in the last year.
Absence levels for the past two years are up by 27% for small companies and 30% for medium ones, suggesting the impact of stress on absence could be an increasing worry as businesses become larger and more established.
However there is some optimism about the year ahead, with the prospect of a stronger economic environment (33%) and expansion of business in the UK (29%) being cited as the two biggest opportunities for 2013.
Richard Coleman, director of SME at Zurich Insurance said: "These figures are strong evidence that addressing workforce challenges and risks is an essential part of achieving better performance and greater growth for British small businesses. If these issues aren't addressed they could have serious long-term consequences for business stability and performance.
"People are the lifeblood of any business, regardless of size, and looking after them by ensuring that stress levels are balanced and morale is kept high is vital if a company is going to attract the most skilled employees and retain existing talent."
