Uncertainty puts investment on hold for SMEs, Barclays Index reveals

UK businesses have slowed spending and delayed investment decisions through the third quarter, as economic and political uncertainty prompts firms, especially small and medium-sized enterprises, to build up cash reserves and wait for clarity from the Autumn Budget. Yet new data suggests this caution could give way to a significant wave of investment if the Chancellor delivers supportive measures.

The findings come from the latest Q3 Barclays Business Prosperity Index, which combines anonymised client data with a survey of 1,000 UK business leaders. Together, they paint a picture of hesitancy in the short term, but also a business community broadly confident in its own prospects and ready to accelerate growth once policy stability is restored.

Barclays’ data shows UK business cash inflows fell 1.9% year-on-year in Q3, although this marked an improvement on Q2. Outflows dropped even more sharply – down 3.1% – suggesting firms have tightened control over expenses.

SMEs led the move to strengthen balance sheets, growing savings by 6.1% year-on-year, outpacing their larger counterparts. Meanwhile, lending began to recover, with loan balances rising 2.2% and loan volumes up 4.1% on the year, driven mainly by bigger corporates. SMEs remained reluctant to borrow for investment until after the Budget.

More than half of all businesses (55%) said they are delaying investment decisions ahead of the Chancellor’s fiscal plans, with almost a third calling for greater policy stability to unlock private sector capital.

Uncertainty tops business concerns

Economic uncertainty has become the single biggest challenge for UK businesses, cited by 36% of respondents, a sharp seven-point rise compared to last year.

Smaller firms reported feeling the strain most acutely: 45% of SMEs said uncertainty around future policy was having a negative impact, while 58% of larger corporates said their experience was the opposite, suggesting size is increasingly shaping how businesses navigate the current environment.

Despite external headwinds, confidence in businesses’ own prospects remains strong. A resounding 86% said they feel confident about their prosperity over the coming year, rising to 91% among large companies. Longer-term confidence remains similarly high, with more than 80% of leaders optimistic about prospects over the next three to five years.

Investment could surge if the Budget delivers

Business leaders are clear on what they want from the Chancellor: support with reducing operating costs (36%); improved access to finance (35%); and increased access to skilled labour (29%). If those measures appear in the Budget, 83% of respondents say they intend to increase investment.

“It is interesting to see that seven in 10 leaders believe having a national investment target will boost business investment, and we look forward to hearing the Chancellor’s approach to supporting UK business and wider productivity to drive growth in the upcoming Budget.” 

Last month, Barclays highlighted a potential £60bn opportunity for the UK economy if SMEs invested at rates similar to larger firms, calling for a national investment rate of 22% of GDP by the end of the Parliament.

Tariff uncertainty reshapes global trade strategy

Six months after “Liberation Day” – the introduction of new US tariffs – business leaders say global trade uncertainty remains a significant concern. Nearly eight in 10 (79%) are still worried about tariff instability, and 77% say it has influenced where their business is choosing to invest.

The impact has been felt heavily in supply chains: rising goods and materials costs were cited by 28% of firms.

As a result, 62% of businesses have scaled back US operations, investment, or supply chain exposure; Europe is emerging as the preferred international partner, with 51% planning to prioritise European markets over the next year; 23% report that the shifting trade environment has improved competitiveness of UK-made products; and 30% are increasing domestic investment in response to global volatility.

Barclays’ client data reveals inbound international payments declined 3.5% year-on-year, though the slowdown stabilised compared to Q2.

“Our data suggests UK businesses may be adapting to the new world order on tariffs.”

The Q3 Index suggests UK businesses are walking a tightrope: cautious for now, but poised for action. Confidence in their own resilience remains high, and most see the Autumn Budget as the trigger for unlocking long-delayed growth plans.

With eight in 10 ready to increase investment if fiscal policy aligns with their needs, the Chancellor’s next steps could determine whether 2026 begins with renewed business expansion or continued caution.