Small Business Confidence Hits Record Low as Growth Expectations Collapse
The Federation of Small Businesses reports that only 18% of UK small firms expect to grow in the next 12 months, while 32% expect to shrink, sell or close, producing a record negative balance.
The latest Small Business Index from the Federation of Small Businesses (FSB) has revealed a sharp collapse in entrepreneur confidence, with only 18% of small firms expecting to grow over the next 12 months. In stark contrast, 32% expect to shrink, sell, or close entirely, producing a record net balance of -14%—the worst outlook in the FSB's tracking.
Revenue performance in the second quarter of 2026 was equally bleak: just 22% of businesses reported higher revenue compared with 55% whose takings fell. Business owners cited the weak domestic economy (64%), the tax burden (40%) and labour costs (33%) as the main barriers to growth.
In response, the government has announced a 20% business-rates reduction for pubs, clubs and live-music venues in England from April 2027, and plans to expand the British Business Bank's Growth Guarantee scheme to support 12,000 additional UK businesses through improved access to commercial loans.
What this means for expats: If you're considering starting or investing in a small business in the UK, this data signals a challenging trading environment. Rising labour costs and tax burdens, combined with weak consumer demand, suggest you'll face headwinds. However, targeted support schemes for specific sectors (hospitality, live entertainment) may offer opportunities if your business fits those profiles. Job security may be tighter as small employers pull back on hiring.
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