SME growth forecasts rise for first time since July 2024

The latest data from Novuna Business Finance shows early signs of renewed optimism among UK small businesses, with growth forecasts rising for the first time since July 2024, bringing to an end the longest downturn recorded in the Business Barometer’s 12-year history.

After an 18-month period of decline, during which the proportion of small businesses predicting growth fell for five consecutive quarters to a five-year low of 25%, January 2026 has delivered a modest but notable upturn. The latest figures show that 27% of small businesses now expect growth in the first three months of 2026.

While the increase is slight compared with the final months of 2025, it marks a significant turning point following the longest-running slump in growth forecasts since the Business Barometer began tracking small business sentiment.

The new data follows a previous Novuna Business Finance poll which found that 84% of small business owners entered 2026 with firm intentions to pursue new growth initiatives, underlining a strong sense of resilience despite volatile market conditions. Combined with the latest growth outlook figures, the findings suggest that an organic uplift in small business confidence may be emerging, even against a backdrop of ongoing geopolitical uncertainty.

Unlike general confidence indicators, the Novuna Business Finance Business Barometer focuses specifically on whether small business owners forecast tangible growth for their enterprises.

Key findings for Q1 2026

Growth forecasts improved quarter-on-quarter in nine industry sectors, including manufacturing (27%), construction (22%), retail (32%), finance and accounting (37%), legal services (45%), medical services (34%), transport and distribution (29%), property and real estate (28%), and agriculture (21%). Manufacturing and transport recorded their highest growth outlooks in 12 months, while construction and agriculture reached six-month highs.

Younger, established businesses – those trading for less than five years – were significantly more optimistic, with 41% forecasting growth, up from 32% last quarter. This compares with 20% of businesses trading for more than 20 years, down slightly from 22%.

Funding choice also played a role in growth expectations. Businesses using asset finance (47%) and invoice finance (45%) were more likely to forecast growth than those relying on personal investors (34%), friends and family (34%), or government grants (42%).

Regionally, the UK picture remains divided. Growth forecasts rose in six regions but fell in five, effectively splitting the country in two. London remained the strongest-performing region, with 40% of small businesses predicting growth. The largest quarter-on-quarter increases were seen in the West Midlands and Scotland. In contrast, forecasts continued to fall in the East Midlands and North West, while the North East recorded its lowest growth outlook since Spring 2024.

Commenting on the findings, Joanna Morris, Head of Insight at Novuna Business Finance, said: “Our seasonal research around New Year’s Eve showed a clear statement of intent from UK small businesses for the year ahead.

“Despite the unprecedented market uncertainty and their growth forecasts falling to a record low last year, the majority were determined to find new ways to secure growth this year.

“Our new growth forecast data finally shows an upturn in growth forecasts this quarter, after an 18-month period when they were in freefall. Whilst this is most welcome news, the picture of Britain being divided into two is a concern. Also, our data over 12-years suggests small business confidence often starts well at the start of a year, only to fall away in the quarters that follow. So, it is too early to say whether the positive news for this quarter is the start of a sustained upward trend.

“For now, it is a positive start to 2026, and we note that those enterprises looking for flexible and tailored funding solutions are also more likely to follow an upward trajectory. This is something we will examine in more detail as the year unfolds.”