The percentage of UK small businesses predicting growth has dropped to a four-year low (29%) — with significant falls in the manufacturing, construction and retail sectors — according to new figures from
Novuna Business Finance.
Nationally, growth outlook now stands at its lowest level since the first quarter (Q1) of 2021 (26%), and — if the first lockdown periods are taken out of the equation — it is the first quarter in 11 years when the percentage of small businesses predicting growth has fallen below 30%.
The current position stands in stark contrast to last summer, when the ‘election bounce’ of a new Government saw an immediate upturn in small business confidence, as 35% predicted growth. A Budget and Spring Statement later and with tariff chaos gripping the economy — small business forecasts are falling to a new low. The research findings are the latest from Novuna Business Finance’s Business Barometer study, which has tracked the percentage of small business owners that predict growth every quarter for the last 11 years.
With UK small business confidence drpopping for a second successive quarter, Novuna’s new data also shows that current economic volatility is a cause of serious concern to 69% of small businesses. While 12% already think US tariffs will directly impact their own businesses, a further 9% fear the supply chain fall-out of tariffs on the European Union (EU). More significantly, almost half of small businesses (48%) believe the current economic instability will play out in UK tax rises later this year — and 30% fear current geopolitical events will trigger a fall in consumer spending this summer. All these factors are contributing to the significant fall in small business growth forecasts for the three months to 30 June 2025.
Market uncertaintyFurthermore, the consequence of market uncertainty has led to falls in small business growth outlook across many key industry sectors, including manufacturing, construction, retail, media, education, legal, finance and medical services. Growth outlook in the manufacturing sector has fallen to the lowest since the UK went into the first Covid-19 lockdown and — if this is ruled out as an exceptional period — this quarter is the first time in 11 years when the percentage of small manufacturing businesses predicting growth has fallen below 20%. In addition to this, growth outlook in retail has hit a three-year low and in construction a 12-month low.
Regionally, small business growth forecasts in London recovered after a significant fall in Q1 of 2025. The North East, East and South West were the only other UK regions where growth outlook increased on the last quarter — with sharp falls for Q2 recorded in the North West, Yorkshire, West Midlands, South East, Wales and Scotland.
Jo Morris, head of insight at Novuna Business Finance, said: “Ahead of the Government’s Autumn Budget last year and recent Spring Statement, small businesses feared measures that might negatively impact their growth plans. However, events of recent weeks have delivered seismic shockwaves on an entirely different scale and the one thing small businesses really dislike is uncertainty. After the promise of recovery last summer, there has since been a slide in small business confidence and this plays out with this quarter seeing small business growth forecasts at their lowest level for years.
“Manufacturing is a particular concern, and even in those regions and sectors where growth forecasts are remarkably resilient, there remain serious fears about the possibility of tax rises later this year. This is probably coloured by the negative reaction of small business owners to the recent hikes in employer’s National Insurance.”
Jo Morris concluded: “The Government is committed to a growth agenda for the UK economy — as we all are — but that simply will not happen without small businesses feeling they can drive forward their growth plans. There are 5.5 million SMEs in the UK and when their growth predictions fall, we all need to sit up and listen.”