Britain’s small business sector is facing its bleakest outlook in more than a decade, with a record number of firms warning they may shrink, sell up or close over the next 12 months.
Research from the Federation of Small Businesses (FSB) found just 18 per cent of small firms expect to grow in the coming year — the lowest figure since its Small Business Index began in 2014.
Meanwhile, nearly one-third (32 per cent) expect to reduce their operations, sell their business or shut entirely, producing a record net confidence balance of -14 per cent.
The survey highlights growing pressure from a weak domestic economy, rising taxes and increasing labour costs. Almost two-thirds (64 per cent) of firms said the UK economy was the biggest barrier to growth, while 40 per cent pointed to the tax burden and 33 per cent to labour costs.
Small businesses reported a sharp slowdown in trading conditions, with only 22 per cent seeing revenues rise in the second quarter, compared with 55 per cent reporting declines.
The outlook for the next quarter remains subdued, with 48 per cent expecting revenues to fall.
Cost pressures are also intensifying, with 89 per cent of firms reporting higher running costs than a year ago. Taxation, fuel, utilities and wages were identified as the biggest contributors.
The figures underline the growing strain on Britain’s entrepreneurs, with many firms now focused on survival rather than expansion as economic uncertainty continues to weigh on investment and confidence.
Tina McKenzie, FSB’s Policy Chair, said: “With a new Government imminent, we need to see new drive, ambition and focus to get the ‘growth, growth, growth’ promised at the election.
“We cannot and must not accept a ‘new normal’ where more small firms believe they will shrink, sell up, or close entirely than anticipate growing over the next year. Small firms are the only engine of growth present in each and every postcode and we need them firing on all cylinders.
“The unforced errors on business rates made at the last Budget clearly need to be revisited and reworked – and we strongly welcome Andy Burnham’s promising comments in this regard. The new Prime Minister’s first Budget will be a huge early test of whether he can put small businesses first, drive down costs, and drive up growth, opportunity and jobs – but what is crucial is that this is complemented by every department finally putting growth first and pulling in the same direction.
“Part of that is delivering on important manifesto commitments – especially on late payments – where progress has been present but pedestrian. The new Commercial Payments Bill must be prioritised and given a day-one commitment to bring these vital measures into force as soon as possible.
“But equally, this will be about recognising that those running small businesses are people too, and suffer just as much as everyone else when a ‘Whitehall knows best’ culture fails to listen to the people delivering growth on the ground.
“Small businesses are by their very nature optimists. We can all hope that a new Government with refreshed ministers will start to turn things around.”
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