Britain’s small businesses are struggling to plan for growth as economic uncertainty becomes the biggest challenge facing owners, with almost half citing an unpredictable economy as one of their three main barriers to running their companies.
The findings come after the arrival of a fifth prime minister in four years and ahead of an autumn Budget, adding to concerns among small and medium-sized enterprises about the direction of government policy.
Simply Business’s latest SME Insights Report, based on surveys conducted during 2026, found that 48 per cent of small business owners now rank economic uncertainty among their three biggest challenges, up sharply from 16 per cent in 2025.
Uncertain consumer demand was the second-largest concern, cited by 41 per cent, followed by high operating costs, including energy bills, at 35 per cent.
The deterioration in sentiment comes despite a modest improvement in expectations for the economy. Some 43 per cent of owners expect economic conditions to worsen over the next 12 months, compared with 50 per cent last year.
The findings underline the importance of smaller companies to the wider economy. SMEs account for about 60 per cent of private-sector employment and generate £2.8 trillion in annual turnover.
Rising costs constrain expansion
Cost pressures remain a defining feature of the operating environment.
A Simply Business survey conducted ahead of the Spring Statement found that 82 per cent of small business owners had experienced higher operating costs in the 12 months to February 2026. One-third reported increases of between 11 and 30 per cent.
Owners are also looking to government for measures that could improve the conditions for expansion.
Some 27 per cent said a reduction in corporation tax would provide the greatest assistance, while 24 per cent called for a higher VAT registration threshold. Almost one in five said they would hire additional staff if the government reduced the tax burden on their businesses.
Ryan Sullivan, founder of bespoke carpentry business Swyft Services, said:
“For me, general stability and reducing the cost of employing people would make the biggest difference. I want to grow and create jobs, but taking on my first full-time employee is a huge financial commitment. Anything that reduces that initial cost and uncertainty would make it much easier for a small business to expand.”
The comments highlight the tension confronting smaller employers: many want to expand and create jobs, but face significant upfront costs when taking on staff.
Resilience despite uncertainty
The pressure has not diminished the sense of purpose among business owners.
Some 87 per cent said they continued to derive a sense of personal meaning and accomplishment from running their business, while 75 per cent identified the freedom of being their own boss as the most rewarding aspect.
Financial necessity was not the dominant reason for starting a business. Some 57 per cent cited being their own boss as a motivation, while 34 per cent pointed to pursuing a personal passion. Only 22 per cent said financial necessity was a reason for starting their company.
The appetite for self-employment is also reflected in the growth of side businesses. A separate Simply Business survey of UK adults conducted in January 2026 found that 45 per cent were running a side hustle, with almost a quarter having started one during the previous year.
Fay Phillips-Jones, founder and HR career coach at Coaching With Fay, said: “Small-business ownership can make you feel successful and financially vulnerable in the same week. There are still moments when I wonder where the next payment will come from because income can be uneven. Then a former client recommends me to somebody new, and that expression of trust provides both commercial reassurance and an enormous emotional lift. I never take it for granted.”
“More proportionate tax and National Insurance support for microbusinesses would make a meaningful difference, particularly during the early stages of growth. A tax bill that may look modest within a larger organisation can remove a microbusiness’s entire budget for training, systems or professional support.
Policy instability complicates long-term planning
For business owners, uncertainty is not confined to demand and costs. Frequent changes in government policy are also making it harder to plan investment and hiring decisions.
Julie Fisher, UK chief executive of Simply Business, said: “As a country, we’ve now seen five prime ministers in four years. This unpredictability in government is making it difficult for businesses to plan ahead, with 65% saying frequent policy changes impacts their long-term planning. It’s encouraging to see the government considering how to tackle the cost of living and business rates. But they need more than promises.
“This year’s SME Insights Report continues to show the impressive resilience and adaptability of small business owners in the UK. It’s clear that many owners feel connected by something deeper, with the majority stating that the freedom to be their own boss is what they find most rewarding. I’m backing our nation’s small business owners to find a way to win and come out on top.”
The figures present a mixed picture of Britain’s small-business economy. Owners remain willing to invest, hire and build companies, but rising costs, uncertain demand and shifting government policy are making longer-term decisions harder to justify.
With the autumn Budget approaching, pressure will be on ministers to provide greater certainty for the businesses expected to play a central role in employment and economic growth.
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