Market turmoil battering confidence as UK small business growth outlook hits four-year low

Nationally, growth outlook now stands at its lowest level since Q1 2021 (26%), and - if the first lockdown periods are taken out the equation - it is the first quarter in eleven years when the percentage of small businesses predicting growth has fallen below 30%.

The current position stands in stark contrast to last summer, when the ‘election bounce’ of a new government saw an immediate upturn in small business confidence, as 35% predicted growth. Two budgets later and with tariff chaos gripping the economy – small business forecasts are falling to a new low.

The research findings are the latest from Novuna Business Finance’s Business Barometer study, which has tracked the percentage of small business owners that predict growth every quarter for the last 11 years.

With UK small business confidence falling for a second successive quarter, Novuna’s new data also shows that current economic volatility is a cause of serious concern to 69% of small businesses. Whilst 12% already think US tariffs on the UK will directly impact their own businesses, a further 9% fear the supply chain disruption of tariffs on the EU.

More significant, almost half of small businesses (48%) believe the current economic instability will play out in UK tax rises later this year - and 30% fear current geo-political events will trigger a fall in consumer spending this summer. All these factors are contributing to the significant fall in small business growth forecasts for the three months to 30 June.

Sector disruption as manufacturing confidence plummets

The consequence of market uncertainty has led to falls in small business growth outlook across many key industry sectors, including manufacturing, construction, retail, media, education, legal, finance and medical services. Growth outlook in the manufacturing sector has fallen to the lowest since the UK went into the first Covid lockdown and - if one rules this out as an exceptional period – this quarter is the first time in 11-years when the percentage of manufacturing small businesses predicting growth has fallen below 20%. In addition to this, growth outlook in retail has hit a three-year low and in construction a 12-month low.

Sectors reporting the biggest quarter-on-quarter falls in growth outlook

Quarter 2 2025 to Quarter 3 2024

Manufacturing 19% 27% 33% 35%

Construction 19% 26% 29% 36%

Retail 22% 33% 41% 37%

Regionally, small business growth forecasts in London recovered after a significant fall in Q1 2025. The North East, East and South West were the only other UK regions where growth outlook increased on last quarter – with sharp falls for Q2 recorded in the North West, Yorkshire, West Midlands, South East, Wales and Scotland.

Percentage of small businesses predicting growth each quarter by region

Risers

London 48% (+9)

North East 42% (+17)

East 34% (+10)

South West 24% (+7)

Fallers

West Midlands 36% (-6)

Scotland 29% (-7)

East Midlands 28% (-3)

South East 25% (-9)

Yorkshire / Humber 23% (-6)

North West 21% (-16)

Wales 13% (-3)

Jo Morris Head of Insight at Novuna Business Finance comments: “Ahead of the Autumn Budget and Spring Statement, small businesses feared measures that might negatively impact their growth plans. Events of recent weeks have delivered seismic shockwaves on an entirely different level and the one thing small businesses really dislike – uncertainty. After the promise of recovery last summer, there has since been a slide in small business confidence and this plays out with this quarter seeing small business growth forecasts at their lowest level for years.

"Manufacturing is a particular concern, and even in those regions and sectors where growth forecasts are remarkably resilient, there remain serious fears about the possibility of tax rises later this year. This is probably coloured by the negative reaction of small business owners to the hikes in employer’s National Insurance last autumn.”

“The Government is committed to a growth agenda for the UK economy – as we all are – but that simply will not happen without small businesses feeling they can drive forward their growth plans. There are 5.5 million SMEs in the UK and when their growth predictions fall, we all need to sit up and listen.”