Most British companies (98 percent) spend less than £1,000 a year on IT security, says Panda Security.
Research by the security vendor revealed that 57 percent small businesses in the UK use free security software - more than the European average of 41 percent.
However, Panda also said that 22 percent of small businesses in the UK admitted they either don't have, or don't know if they have any security solutions in place.
Of those UK businesses without security protection, four out of five claimed that they don't believe they need it. However, Panda said the main reason cited elsewhere in the world for not installing security software was cost.
Antivirus software is the most popular security solution, with all of the companies that had security software installed claiming to have it in place. Firewalls and anti-spyware were the next most popular protection - 86 percent of UK SMB's said they have this installed.
Nearly three quarters of businesses said they had anti-spam solutions, while 43 percent also revealed they use web filters. Panda also said that just two in five SMB's reported experiencing an infection - that's lower than the European average of 68 percent.
"Saving pennies in this day and age by using free security software shows smart thinking by UK SMB's," said Nigel Stanley, practice leader for security at Bloor Research.
Luis Corrons, technical director of PandaLabs added: "In spite of the low levels of spending, the level of protection offered by free software seems to be keeping infections at reasonable levels in comparison to other European countries."
"However, there is a worryingly high number of companies that appear to be burying their heads in the sand and failing to protect themselves against internet borne threats. It's precisely these companies that offer rich pickings to cybercriminals looking for PCs to infect with botnets or other malware."