Small business growth forecasts crash to lockdown levels

A year after the new Government took office, confidence among UK small businesses has collapsed, with growth forecasts falling to their lowest levels since the height of the COVID-19 lockdowns, according to new research from Novuna Business Finance.

The percentage of small businesses predicting growth in the next three months has fallen for the fourth consecutive quarter, dropping to just 26%, a five-year low and on par with levels last seen in 2020. This marks a significant decline from the 35% confidence peak recorded in July 2024, shortly after the Labour Government was elected.

The July 2025 findings are drawn from Novuna’s Business Barometer, a quarterly study based on a representative sample of over 1,200 small business owners across the UK. The data reveals sharp regional declines in confidence, with London businesses seeing growth expectations fall from 48% to 37%, and the North East from 42% to 29%. The West Midlands (36% to 24%) and Scotland (29% to 22%) also posted notable drops.

“This time last year, the election bounce of a new Government taking office saw an immediate rise in small business confidence – with the percentage predicting growth rising from 30% to 35%. Ever since then, small business growth forecasts have fallen over four consecutive quarters,” said Jo Morris, Head of Insight at Novuna Business Finance.

“The new low of 26% for the three months to 30 September is on a par with the lockdown months of 2020.”

Several factors are weighing on small business sentiment, including the recent National Insurance hike for employers, ongoing uncertainty over tariffs, and concern around possible autumn tax rises. Novuna’s report explores how these challenges have eroded confidence since the change in government.

While most sectors reported declining optimism, there were modest signs of recovery in manufacturing (up from 19% to 25%) and construction (19% to 24%). However, outlooks worsened significantly in real estate, transport and distribution, and seasonal sectors such as agriculture, hospitality, and leisure.

Despite the bleak outlook, Novuna encourages businesses to remain forward-looking. “Periods of uncertainty can also be times to invest in long-term success,” added Morris. “Novuna Business Finance is committed to helping established enterprises make the investments that will power future growth.”