Chancellor urged to win over sceptical SMEs as confidence gap widens

With the Autumn Budget fast approaching, new data suggests the Chancellor faces a growing challenge to win back the trust of Britain’s smallest firms, as confidence in the Government’s pro-business agenda declines sharply among SMEs.

Research from Simply Asset Finance shows that 46% of smaller SMEs are not confident the Government will champion pro-business policies in the months ahead – almost double the proportion seen among medium-sized businesses (22%). The figures mark a significant slide in sentiment: in the run-up to the 2024 Budget, only 26% of smaller businesses expressed such doubts.

By contrast, medium-sized firms are increasingly optimistic. Confidence among this group that the Government will drive a pro-business agenda has risen from 58% last year to 65%, suggesting a widening divide between the experiences and expectations of the UK’s SME community.

The research also highlights a striking gulf in outlook. Only 17% of smaller SMEs say they feel excited about the year ahead, compared with 39% of medium-sized businesses, making the smallest firms less than half as likely to feel positive about the future.

Analysts suggest this rising pessimism is rooted in the mounting economic pressures facing smaller enterprises.

Twelve months ago, smaller businesses identified high interest rates (42%), a stagnant UK economy (37%) and high inflation (34%) as their biggest threats. But the landscape has shifted.

Today, 48% of small firms say the stagnant economy is their number one concern. Inflation remains a major threat for 45%, while 38% continue to struggle with high interest rates. The data underscores how sustained economic stagnation and persistent cost pressures are squeezing the smallest operators hardest.

The research also reveals the policy areas smaller businesses most want the Government to address. 45% now say they want greater tax incentives for innovation and investment, up sharply from 36% last year. Those calling for action on high energy costs have surged from 26% to 44%, signalling widespread frustration at bills that remain “prohibitively high”.

Simply Asset Finance CEO Mike Randall said the Autumn Budget represents a “perfect opportunity” for the Government to rebuild confidence among smaller SMEs.

“While medium businesses are relatively bullish, smaller businesses are sceptical about the Government’s pro-business agenda,” Randall said. “But the Autumn Budget provides a perfect opportunity for the relationship to get back on track.”

He added that addressing the “fundamental issues” faced by small firms is essential if the UK wants to unlock SME growth: “Businesses are being really squeezed by high costs, and it is important that we see some movement from the Chancellor to mitigate that. But with growth the central focus, it is substantively addressing the hurdles to investment that would reap the most rewards.”

Randall said better incentives, improved certainty, and policies that enable long-term investment will be crucial: “Businesses of all shapes and sizes remain eager to grow but to do so, the Government needs to ensure that the conditions are right for them to thrive.”