UK businesses remain deeply cautious about the economic outlook, with rising costs, weaker margins and financial pressure weighing on confidence across the corporate sector.
The latest Azets Barometer for Q2 2026 found that economic uncertainty is the biggest concern facing companies over the next year, cited by 69% of senior business leaders.
The survey of 442 UK decision-makers revealed a divided outlook, with only 43% optimistic about the UK economy over the next 12 months, compared with 45% who were pessimistic.
Businesses highlighted mounting cost pressures as the biggest challenges. Almost half (48%) reported higher labour costs, while 46% said profit margins had come under pressure and 38% pointed to growing cashflow concerns.
The difficult trading environment is also affecting hiring plans. Seven in ten businesses expect to freeze or reduce employee numbers, signalling continued caution over expansion.
At the same time, 82% of firms expect to maintain or increase borrowing, suggesting companies are relying on finance to manage pressures and support operations.
The findings underline the strain facing UK plc as businesses navigate weak confidence, elevated costs and uncertainty over the path of economic recovery.
Peter Gallanagh, UK Chief Executive at Azets, said: “Businesses in the UK are on the cusp of a cycle of despair.
“They can’t invest and grow because of the economic climate, and the economy won’t grow at the pace we need it to because businesses can’t invest and grow.
“The government needs to take the chains off companies in the UK and give them the fuel they need to go for growth.
“With a change of prime minister taking place, this is the perfect time to look at the cost issues facing businesses and find ways the government can reduce the burden on firms so they can return what they do best: powering the economy.”
Businesses recognise, though, that resilience is largely self-directed, according to the findings of Azets’ survey.
Respondents said top three factors that were critical to a firm’s resilience were people and talent, operational agility and leadership and decision-making capability.
Peter Gallanagh said: “British businesses, especially SMEs, have always known how and when to pivot and evolve in the face of adversity.
“Through pandemics, wars and economic crises they’ve shown the agility and the foresight to adapt to challenges and come out leaner and more efficient.”
With the trading climate proving tough, 41% of UK firms said they’d be open to accepting investment from a business based outside of the UK.
Peter added: “There’s no doubt that it has got harder and more expensive for businesses to access funding – whether that’s for growth or rescue.
“With this in mind, it’s no surprise that the best of British are looking abroad for support – and given the track record these businesses have of innovation and success it’s clear there’s a willing supply from foreign shores.”
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