SME growth forecasts fall to 5-year low as Budget fears mount

Growth forecasts among small businesses have fallen to their lowest level since the early months of the pandemic, with confidence down across every industry sector and widespread concern over the impact of the forthcoming Autumn Budget.

New figures from Novuna Business Finance’s quarterly Business Barometer show that just 25% of small business owners predict growth in Q4 2025, a five-year low and the fourth consecutive quarterly fall. The figure is down from 35% a year ago, when optimism briefly rose after the General Election.

At the same time, the proportion of small firms expecting contraction or collapse in the next three months has risen to 23%, the highest since early 2021.

Budget fears are adding to uncertainty. The survey found that 86% of small business owners are worried about potential announcements this autumn, particularly the risk of tax rises that could further squeeze margins.

Sector breakdown

Growth expectations have fallen across all sectors since the start of 2025. Construction confidence dropped to 17%, retail to 25%, and agriculture to 19%, half the level seen in Q1. Hospitality and leisure forecasts (23%) are now at their lowest since 2021, while media and marketing fell sharply from 47% at the start of the year to 26%.

Even sectors traditionally more resilient, such as finance and accounting (35%) and medical services (32%), have seen declines.

Regional picture

Confidence has weakened across most of the UK. The South East (20%) and South West (13%) are both at their lowest levels since 2020, while London – historically a driver of growth expectations – slipped to 36%, its weakest performance since Q1 2021. Scotland saw one of the steepest falls, with only 15% of firms predicting growth, down from 36% at the start of the year.

Jo Morris, head of insight at Novuna Business Finance, said the findings pointed to an ongoing slide in business confidence.

“This spring, the percentage predicting growth dropped below 30% for the first time in years and since then it has continued to fall, Morris said.

“There are various factors at play. Market uncertainty is something small businesses do not like, US tariffs have been a cause of concern through 2025 and, for many small businesses, the long tail of Brexit still impacts business confidence – with fewer small businesses today looking to open up trading opportunities in EU markets. The looming Autumn Budget is also a concern for many, as there has been a lot of speculation about possible tax rises.”

Morris added that small firms are looking for certainty and a framework that incentivises growth. “If we want to see growth in the economy, the forthcoming Budget needs to be a ‘Budget for business’,” she said.