Small business growth expectations hit lowest level since 2014, new survey finds

Confidence among Britain's small businesses has fallen to its lowest level since 2014, according to new research.

A quarterly survey by Novuna Business Finance found that just 24% of small businesses expect to grow over the next three months, down from 28% in the previous quarter and marking the biggest quarterly fall in 18 months.

For the first time since the UK entered its first Covid lockdown in 2020, the proportion of businesses expecting growth now matches the percentage that say they are contracting or simply trying to survive, both standing at 24%.

The findings come two years after Labour entered government, with the survey showing that the uplift in confidence seen immediately after the 2024 General Election has now disappeared.

Growth expectations initially rose from 30% before the election to 35% afterwards but have since declined over four consecutive quarters.

Construction, retail and hospitality hardest hit

The sharpest falls in confidence were recorded in sectors already facing significant cost pressures.

Only 15% of construction firms now expect growth over the next three months, while forecasts also fell to 21% among retailers and 21% in hospitality.

Manufacturing, transport and IT were the only sectors to report modest improvements compared with the previous quarter.

Regional divide widens

The survey found growth expectations fell across almost every part of England and Wales.

The North West was the only English region to record an improvement, with growth forecasts edging up from 26% to 28%.

Elsewhere, expectations weakened, particularly in the South East, where forecasts fell from 21% to 16%, and the South West, where they dropped from 22% to 15%.

In Wales, growth expectations fell from 28% to 20%, while Scotland remained unchanged at 22%.

'Small businesses don't like uncertainty'

Jo Morris, Head of Insight at Novuna Business Finance, said the latest figures highlighted the pressures facing SMEs.

She said: "Following a modest recovery earlier this year, the fall back to 24% is a significant setback and, aside from the first Covid lockdown, represents the weakest growth outlook since our Business Barometer began.

"Geopolitical tensions, rising fuel prices and political uncertainty have all contributed to a more cautious outlook. Small businesses are resilient, but they need greater certainty to invest and grow."