UK Small Business Growth Remains Subdued

Only 26% of UK small businesses expect to grow in the final quarter of 2026, according to Novuna Business Finance, as cost pressures and uncertainty over taxation weigh on expansion plans. Half anticipate unchanged trading conditions, while 23% expect contraction or difficulties surviving the winter. The lender’s Business Barometer, based on a nationally representative survey of 1,000 business owners, suggests that a modest improvement since summer has failed to restore momentum.

The latest reading follows a volatile year. Novuna recorded growth expectations of 27% in the first quarter and 28% in the second, before the figure dropped to 24% in July. That summer reading marked a setback after an early recovery from weakness during 2025. The measure tracks the proportion of owners anticipating growth over the next three months, rather than the rate at which the small-business economy is expanding. October’s improvement therefore indicates a broader expectation of growth, without establishing that output has accelerated.

Younger businesses appear particularly exposed, with just 17% of start-ups and younger firms predicting growth this quarter. London’s reading fell from 40% at the beginning of the year to 32%, while the North West improved from 21% to 29%. Retailers recovered some confidence ahead of Christmas: 27% expect growth, compared with 21% last quarter. Nevertheless, their outlook remains weaker than at the start of 2026, limiting evidence of a sustained consumer-facing recovery.

Budget concerns add to the pressure. Some 53% of respondents said further National Insurance increases would damage their growth outlook and finances, while 44% expressed concern about potential corporation tax rises. These are responses to possible policy changes, rather than confirmed measures. For smaller employers, uncertainty over costs can complicate decisions about recruitment, pricing and investment. The survey’s central warning is that stabilisation has yet to translate into a convincing return to expansion.