SMEs remain confident despite gloomy economic outlook

UK small and medium-sized businesses remain optimistic about their own prospects despite growing concerns about the wider economy, according to new research highlighting a significant gap between business confidence and economic sentiment.

Data from the YouGov Business Sentiment Tracker for the first quarter of 2026 found that British businesses scored confidence in the UK economy at just 43.5 out of 100, while rating their own outlook over the next 12 months at 71.

The contrast was even more pronounced among SMEs. While their confidence in the broader economy fell to 37.4, they rated confidence in their own businesses at 64.7, suggesting many remain focused on growth despite a challenging external environment.

The findings come as UK businesses continue to face a range of pressures, including rising costs, higher interest rates, regulatory uncertainty and geopolitical instability.

According to the research, costs and interest rates were the biggest concern for 56% of business decision-makers, followed by achieving financial growth (53%), regulation and policy uncertainty (46%), geopolitical disruption (43%) and maintaining financial resilience (39%).

Despite these challenges, the research suggests businesses have not abandoned growth ambitions. However, many may be struggling to access the funding needed to achieve them.

The report points to an estimated £65 billion SME funding gap in the UK, citing data from the British Business Bank. It also highlights findings from the European Central Bank and European Commission showing that only 3.5% of UK SMEs sought new or renewed finance during the latest survey period, compared with around 20% across the Eurozone.

Separate research from Fleximize found that 59% of SME founders abandoned loan applications before completion, not because they were declined but because the process felt too complex or burdensome.

Stacy Clementson, Head of Credit & Underwriting at Fleximize, said: “UK SMEs are optimistic about their own prospects in a way they simply aren’t about the economy – and that gap has been widening for years.

“The problem isn’t ambition. It’s that too many businesses still think borrowing is taboo.”

Analysis of more than 11,600 loans funded by Fleximize since 2014 found that 59% were used to support cash flow and working capital requirements, while 26% funded growth and expansion initiatives.

The research also highlighted significant differences between sectors. IT and telecommunications businesses reported the highest confidence levels, supported by investment in artificial intelligence infrastructure and data centres. In contrast, legal, hospitality and leisure businesses reported the lowest confidence and greatest economic concerns.

Clementson said the findings demonstrate the need for more tailored approaches to SME lending.

“A hospitality business right now isn’t having the same conversation as a tech firm riding the AI wave. One is fighting to stay open; the other is investing for growth. Treating them as the same borrower is exactly why so many SMEs feel like finance wasn’t built for them,” she said.

The findings suggest that while economic uncertainty continues to weigh on sentiment, many SMEs remain confident in their own ability to grow, provided they can access the funding and support needed to turn their ambitions into reality.