Small business growth outlook stalls as economic fears rise

Small business growth expectations have flatlined heading into summer 2026, with fewer than three in ten firms predicting expansion and a growing majority bracing for the impact of global economic shocks, according to new research from Novuna Business Finance.

The study, based on a survey of 1,000 UK small business owners conducted by YouGov, found that just 28% of SMEs expect growth over the next three months, only marginally up from 27% last quarter. Despite the seasonal uplift typically seen in spring, overall confidence remains subdued.

While some sectors showed modest improvement, including construction (29%, up from 22%), retail (38%, up from 32%) and hospitality (25%, up from 22%). the national picture tells a more cautious story.

Spring 2026 marks the lowest April growth outlook in a decade (excluding the immediate impact of COVID-19 in 2020) and the first time in ten years that growth expectations have remained below 30% for four consecutive quarters

Historically, nearly half of small businesses expected growth at this time of year, with figures as high as 49% recorded in 2015.

Against this backdrop, 78% of small businesses say they fear the impact of geopolitical and economic tensions on their operations. Key concerns include:

• 45% citing the impact of conflict in the Middle East on supply chains -rising to 70% in transport and distribution, 68% in agriculture, and 61% in manufacturing
• 17% worried about the ongoing effects of the war in Ukraine
• 16% concerned about potential US tariffs on UK trade
• 71% fearing possible UK tax increases later this year

These anxieties are compounded by rising operating costs. Previous research from Novuna highlighted that businesses expect transport costs to rise by £753.56 per month on average and machinery running costs to increase by £785.92 per month.

Regional divide begins to emerge

The data also points to an emerging north-south divide in business confidence. In the North East, growth expectations rose sharply from 22% to 33% and the North West saw a smaller increase, from 22% to 26%. By contrast London saw expectations fall from 40% to 37% and the South East dropped from 23% to 21%.

This divergence suggests regional resilience may be shifting, with northern regions showing early signs of stronger momentum.

Joanna Morris, Head of Insight at Novuna Business Finance, said the findings reflect a significant shift in sentiment compared to pre-pandemic norms.

“From 10 years of tracking small business outlook, the spring months usually see a rise in confidence, but this year growth forecasts remain static. Without question, current worries over energy prices and broader economic uncertainty are of great concern to many business owners.”

She added that the current environment underscores the need for sustained support:

“The growth outlook of small businesses is now settling at a level much lower than before the pandemic. This highlights the work that needs to be done to help small businesses take a longer-term view and feel supported in making the investments needed to secure growth.”

Despite pockets of sectoral and regional optimism, the overall picture is one of resilience under pressure.

Small businesses – long considered the backbone of the UK economy – are navigating a complex mix of rising costs, geopolitical instability and policy uncertainty. While growth has not collapsed, it has clearly stalled, with confidence struggling to regain pre-pandemic levels.

As the summer approaches, the challenge for policymakers and lenders alike will be how to restore momentum, and give small businesses the confidence to invest in growth once again.