Small Business Don't Expect to Grow

Only one in six of our vital small and micro businesses expects to grow. According to the Federation of Small Businesses (FSB) confidence among small businesses is at a record low and they’re bracing for shrinkage, sell‑offs and closures.

That’s the starkest possible warning to the new PM: we need urgent action to start up the engine of our economy again and while he’s working out his (many) priorities this has got to be top of his list. We need growth and small and micro businesses are the source of it.

The latest FSB Small Business Index shows confidence has crashed to its lowest level in history. Just one in six small firms expects to grow over the next 12 months. Nearly one in three expects to shrink, sell up, or shut down entirely. The FSB says this is the bleakest reading since the Index began in 2014 and it points to a potential mass contraction in the UK’s small business community unless the new Government acts fast.

A mass contraction of the small business community would mean business closures (which are quietly happening anyway in the hospitality and retail sectors in particular), job losses, huge economic and social impact losses to local communities and society in general as well as disruption to supply chains dependent on the expertise and capability of smaller suppliers to keep bigger businesses operating.

SHRINKAGE AT RECORD LEVELS

The gap between firms expecting growth and those expecting decline has hit its widest ever point:

• 18% expect to grow

• 32% expect to shrink, sell or close

• Net balance: –14%, worse than late 2025

Small firms are dealing with:

• a weak domestic economy (64%)

• a crushing tax burden (40%)

• soaring labour costs (33%)

Small businesses are losing hope.

THE NEXT QUARTER LOOKS WORSE

The second quarter was grim:

• Only 22% saw revenues rise

• A massive 55% saw revenues fall

The outlook is bleak:

• 23% expect revenue growth

• 48% expect revenue to fall

Small firms are being outnumbered two‑and‑a‑half to one by those seeing declines.

TAXES ARE THE BIGGEST DRIVER OF PAIN

9 in 10 small firms have higher running costs with 3 in 10 coping with costs that have jumped by more than 10%

Top cost drivers:

1. Taxation: 58%

2. Fuel: 55%

3. Utilities: 54%

4. Labour: 53%

Small businesses are being squeezed from every direction and many simply can’t absorb any more. If costs rise and you can’t afford to put prices up without scaring off your customers you’re sunk.

THE NEW NORMAL

The FSB says: “We cannot and must not accept a ‘new normal’ where more small firms believe they will shrink, sell up, or close, than anticipate growing.” The small business organisation is calling on the new Government to:

• Fix business rates

• Prioritise late payment reform (the Commercial Payments Bill is going through parliament at the minute)

• Put growth first across every department

• Listen to real businesses rather than taking a ‘Whitehall knows best’ approach.

The figures from the FSB are stark and underline what other business organisations have been finding:

• Confidence at record lows

• Revenues falling for most firms

• Costs rising for nearly all

• Taxes hitting harder than ever

• Growth expectations collapsing

• A third of small businesses preparing to shrink or shut

Small firms are the foundation of the UK from the everyday economy on the high streets to the small suppliers that deliver the vital components of every supply chain.

We have a new PM, a new Chancellor and a new opportunity to get this right. The new Government’s first Budget will be a defining moment. Small businesses need action or Britain risks losing thousands of them.

However what we really need is a small business minister with nothing else to worry about other than small and micro businesses. We need someone in that role who really understands how small and micro businesses operate because they have real lived experience. That minister should sit at the cabinet table, because 5.6 million constituents and their employees deserve better than a junior minister with dozens of other issues to work on. They need and deserve a Government that’s on their side.