UK SMEs focus on domestic market hits record high

A growing number of UK small businesses are abandoning plans for overseas expansion and focusing instead on domestic growth, according to the latest Business Barometer research from Novuna Business Finance.

The nationally representative survey of 1,000 small business owners found that 84% now see the UK market as their main driver of growth over the next 12 months, the highest level since Novuna began tracking sentiment in 2017. Back then, just 64% prioritised domestic opportunities.

The findings come despite the UK government’s celebration of “historic” new trade deals with countries including the United States, India, and the European Union.

Small businesses in agriculture (97%), construction (96%), and hospitality (87%) are the most reliant on the UK market. Manufacturing stands out as the exception: 24% of manufacturers remain interested in EU trade, compared with a national average of 17%.

While the government promotes international trade, Novuna’s data paints a different picture:

• Interest in the USA as a growth market has dropped to 12%, an eight-year low, down from 16% last year and well below the 22% peak at the start of 2020.
• The EU – once a major focus – has seen interest fall from 24% in 2017 to 17% this year.
• Appetite for European markets outside the EU has halved, from 12% to 6%.
• No overseas market has recorded an increase in UK small business expansion plans over the past eight years.

Reliance on the UK market is particularly strong in Yorkshire and Humberside and the West Midlands (both 92%) and the North East (86%).

London, however, bucks the trend: only 77% of small businesses in the capital rely primarily on the UK, while 31% see opportunities in the US and 25% target the EU – significantly higher than national averages.

Scotland presents an interesting paradox. Despite its pro-European reputation, 85% of Scottish small businesses are focused on UK growth, and just 15% are considering EU opportunities.

“These new findings are possibly a consequence of the frustrations many small businesses have felt, following major political shifts over the last eight years.

“Our research in June 2017 revealed dismay over Brexit, with nearly a third of small business owners (31%) saying they wanted a new government that would reverse the Brexit decision. Forward wind to the start of 2025 and our Business Barometer survey revealed that more than seven in 10 small businesses (77%) said they were fearful that policies from the new US administration could have an adverse ripple effect on the outlook for small businesses here in the UK. Our new findings see this playing out, with a growing number of small businesses looking to the local UK market to deliver their aspirations for growth and expansion.”

Morris added that despite high-profile government trade announcements, small businesses remain cautious:

“In recent months, the UK government has heralded a string of so-called ‘historic’ trade deals with India, the United States, and the European Union. Our data questions whether this will deliver an uplift in confidence for UK small businesses, at a time when their growth forecasts are falling each quarter. Small businesses dislike uncertainty, and with the Autumn Budget approaching, many enterprises will be hoping for a Budget that is good for business.”