Small Business Growth Hopes Plunge – Chancellor Must Act

Confidence and growth hopes among the UK’s small business community nosedived further in the third quarter of 2025, according to newly-published research, reinforcing the difficult economic climate that family businesses are currently operating within.

FSB’s Small Business Index (SBI) for Q3 shows overwhelming pessimism, with the headline confidence reading falling to -58 points – even worse than Q2’s gloomy -44 points.

The proportion of small firms bracing for contraction, be it downsizing, closure, or a sale, in the next 12 months has risen to an unprecedented 30 per cent. Within that figure, the percentage of those specifically predicting that they will close the business in the next year has jumped to 6 per cent, up from 4 per cent in Q2. That equates to more than 330,000 potential business closures.

Just 18 per cent of small businesses say they expect to grow in the next 12 months.

FSB is urging the Chancellor, Rachel Reeves, to heed this stark warning and to take dramatic action in next month’s Budget to ease the small business rates burden and the impact of increasing employment costs, and to lower the sky-high tax levels on entrepreneurship.

The factor driving this pessimism around growth was predominantly the domestic economy, cited by over two-thirds of small firms (68%), followed by the tax burden (45%), labour costs (34%), and then consumer demand (28%).

Tina McKenzie, Policy Chair, Federation of Small Businesses (FSB), said: “The fact that under a fifth of small firms predict they will grow in the next 12 months, while nearly a third are looking at shrinking, selling or closing down, is horrifying – and a stark wake-up call for the Government."

“We’re calling on Rachel Reeves to take bold action in the Budget to support entrepreneurship and ease tax and employment cost burdens on small firms – we must turn this around and enable small businesses to grow rather than having their ambitions held back, and in turn hampering economic growth.”

Key Areas Of Concern

• Looking at revenues over the third quarter of 2025 provides little relief. One in five small firms (21%) said their revenues rose over the previous three months, while over half (55%) said they fell.

  
  

• Revenue predictions for the final quarter of the year – usually the so-called ‘golden quarter’ for many consumer-facing businesses in retail and hospitality – were also very subdued, with around a fifth of small businesses (21%) predicting revenue growth, but nearly half (49%) bracing for a fall.

  
  

• Financing is another area of significant concern. Only one in ten small businesses (10%) say they rate the availability and affordability of new finance as good, while over half (54%) rate it as poor. A staggering one in five small businesses (21%) who successfully applied for credit were offered an interest rate over 20%.

  
  

• Late payments were yet again a drag on small businesses’ finances and future plans. Two thirds of small firms (68%) reported experiencing late payments, and one third (34%) said they worsened over the past three months.

Tina added: “Millions of small businesses shrinking, closing, or selling up instead of growing means a vicious cycle of a lower tax take, higher unemployment, and greater demands on the state all exacerbating each other in a downward spiral."

“The Chancellor’s Budget speech will be a make-or-break moment for small businesses. The stakes couldn’t be higher. Without small businesses economic growth is a lost cause. Small firms will be looking for positive backing.”