Novuna Business Finance reveals six-year peak in SME growth barriers

New research from Novuna Business Finance has revealed that the percentage of UK small businesses citing barriers holding back growth has reached a six-year high, with rising energy and fuel prices emerging as a major concern for firms across key sectors of the economy.

According to the latest findings from the lender’s long-running Business Barometer study, 84% of small businesses now report facing one or more barriers to growth, up from 83% a year ago and the highest level recorded since the pandemic period in 2020.

The research found that geopolitical instability and the impact of overseas conflicts on energy and fuel prices are now significantly affecting UK SMEs, with almost one in three businesses (32%) identifying the issue as a material barrier to growth.

Macro-economic uncertainty was cited as the biggest challenge overall, affecting 51% of firms, while 31% pointed to higher running costs linked to rising oil and energy prices.

In contrast, issues such as skilled labour shortages (20%), volatile cashflow (17%), fluctuating exchange rates (7%), digital proficiency (6%) and outdated equipment (5%) were seen as less pressing concerns.

The impact of rising energy and fuel costs was found to be particularly acute among businesses operating in geographically remote areas of the UK. SMEs in the South West of England (42%), Scotland (40%) and Wales (38%) were significantly more likely than the national average to cite energy-related pressures as barriers to growth.

By sector, transport and distribution businesses were most heavily affected, with 58% saying rising fuel and energy costs were constraining growth. Retail firms followed at 45%, ahead of manufacturing businesses at 41%. Hospitality, construction and agriculture businesses also reported elevated levels of concern.

The broader findings suggest growth pressures are intensifying across multiple sectors and regions. Manufacturing (94%), retail (95%) and transport and distribution (90%) businesses were the most likely to report at least one barrier to growth this quarter.

In agriculture, the proportion of firms reporting barriers has reached a four-year high at 86%, while construction, retail and media businesses are experiencing their highest levels of growth disruption since 2020.

The study also highlighted growing pressure on businesses in London, where the proportion of SMEs citing barriers to growth has risen to 88% – the highest level recorded in the capital for six years.

Jo Morris, Head of Insight at Novuna Business Finance, said: “Some may assume that conflict in the Gulf is a far-away issue that only affects governments and big businesses. .

“Our findings show how quickly and how deeply UK small businesses have felt the impact of rising energy and fuel prices in the UK.

“Businesses that rely on heavy equipment and transport seem to have felt the impact most significantly – as have those enterprises based in extreme points of the UK, businesses that may have bigger transport and shipping costs.”

Morris added that while many SMEs continue to pursue growth initiatives, persistent economic pressures are limiting confidence and expansion plans.

“Overall, the fact that four in five enterprises cite factors that are holding back business growth is significant. Actual growth forecasts each quarter have been relatively static for some time.

“Whilst the vast majority of enterprises started the year working on new initiatives to secure growth, this is counter-balanced by the very high number that are trying to overcome obstacles and external market pressures.

“Our tracking suggests that if we want to see a major upturn in UK small business growth forecasts for the summer and autumn months, it is the barriers that need to be tackled first – and urgently.”