Panic as UK small business confidence hits lowest level in five years

The UK’s small businesses appear to be facing a crisis, with confidence plunging to levels last seen during the Covid lockdowns, according to alarming new research. The latest figures from Novuna Business Finance, a provider of business finance to SMEs and larger corporations across the UK, reveal that only 26% of small businesses are expecting growth in the next three months, a figure not seen since 2020, at the height of Covid-19 lockdown. According to the latest government statistics, there are 5.45 million small businesses across the UK. These are businesses that have 0 to 49 employees.

Jo Morris, Head of Insight at Novuna, told the Express that businesses are buckling under “too much, too fast”, due to all the changes since the election. She said: “Small businesses are resilient – they can usually move faster than large companies and adapt quickly but the pace and volume of changes since the election has been overwhelming.

“We’re talking about market volatility, uncertainty, tax rule shifts, employer regulation changes all hitting at once.”

The Novuna data reveals a fourth consecutive quarterly drop in growth forecasts, with confidence levels now matching the darkest days of 2020.

London saw one of the steepest falls, from 48% to 37%, the North East tumbled from 42% to 29%, and Scotland plunged from 29% to 22%.

Morris added: “This time last year, the election bounce of a new Government taking office saw an immediate rise in small business confidence – with the percentage predicting growth rising from 30% to 35%.

“Ever since then, UK small business growth forecasts have fallen over four consecutive quarters. The new low of 26% for the three months to 30 September is on a par with the lockdown months of 2020.

“In contrast to the national picture, there are signs of positive growth outlook among Welsh businesses. Having trailed the national average for some time, Wales is now above the national average in terms of the percentage of small businesses predicting growth for the months ahead.

“Our national new report on small business outlook over the last year looks closely at how recent market developments – such as the NI hike for employers, uncertainty over tariffs and fears over autumn tax rises – have played out on small business confidence and their growth predictions.

“Whilst the economic picture for many enterprises is challenging, periods of uncertainty can also be times to invest in long-term success, and Novuna Business Finance is committed to helping established enterprises make the investments that will power future growth.”

While manufacturing (rising from 19% to 25%) and construction (up from 19% to 24%) showed modest recoveries from record lows earlier in 2025, real estate, transport, and distribution sectors saw notable declines between Q1 and Q2 2025.

Since the Labour Government came into power, one of the most significant changes has been the increase in Employer National Insurance contributions from 13.8% to 15%, along with a reduction in the contribution threshold from £9,100 to £5,000.

Although the Employment Allowance was broadened to provide relief for certain businesses, many employers are now encountering higher wage expenses while other input costs continue to stay high. Other changes since the Autumn Budget also include a reduction in capital gains allowance and changes to business rates.