SMEs Back Themselves But Not The Economy

UK entrepreneurs are confident about their own business prospects in the upcoming tax year, despite pessimism over the wider UK economy, according to new findings from Rathbones, one of the UK’s largest wealth and asset management groups.

A survey of more than 1,000 SME founders, owners and senior executives found that over two thirds (68%) feel confident about their business outlook this year, including almost one in three who are very confident.

Yet 37% are pessimistic about the broader economic environment, and 25% believe the government does not do enough to support people looking to build and grow businesses.

Faye Church, Senior Financial Planning Director at Rathbones, based in Guildford, says:

“Entrepreneurs are clearly backing themselves, even if they don’t feel backed by the system around them. The gulf between business level confidence and national economic optimism shows how hard business owners are working to maintain momentum amid tax pressure and rising costs. This resilience is encouraging, but it also highlights the need for policies that unlock investment and restore long-term confidence."

Confidence holds, but fatigue is setting in

While motivation among business bosses remains relatively strong (cited by 60% of the sample), nearly a third (29%) report feeling neutral and 12% say they are unmotivated.

The findings point to operational fatigue amid ongoing cost pressures and economic uncertainty. Earlier research revealed that more than one in five SME leaders (21%) laid off staff last year due to cost increases, including higher business rates and national insurance contributions.

“In our recent conversations with business owners, one theme keeps coming up: in a world of rising costs, shifting tax rules and continued economic uncertainty, people want clarity,” Faye Church adds.

“Our clients want to know which financial decisions matter most right now and what practical steps they can take to protect and grow their personal wealth while running a successful business.”

Five financial planning priorities for business owners this tax year

With business confidence diverging sharply from broader economic sentiment, many founders are refocusing on the areas they can control, starting with their own financial planning. Faye Church outlines five strategies to help business owners strengthen their long-term position.

1. Separate business wealth from personal wealth

For many founders and directors, the boundary between personal and business finances can blur. If too much personal wealth is tied up in the company, an unexpected downturn can throw long-term plans off course. Review how much of your net worth sits within the business, whether your salary/dividend mix is tax efficient, and whether surplus company cash is better reinvested, moved into personal investments or added to pensions.

2. Make the most of the current tax environment

Tax planning remains a core part of effective financial management for directors, and recent changes to allowances mean business owners should review their approach each year.

Key areas to revisit include:

• Reduced dividend allowances and the most efficient way to extract profits

• Lower Capital Gains Tax allowances on asset or share disposals

• Using pension allowances, which may create opportunities for company contributions

3. Manage excess business cash more effectively

A common question from business owners is: “What should I do with excess cash in my company?” Cash offers stability, but in a higher inflation environment, holding too much can erode long-term value.

Options include optimising working capital reserves, using short-term cash management solutions, and considering longer-term extraction strategies such as company pension contributions (where appropriate). Your approach should reflect your cashflow needs, growth ambitions and personal financial goals.

4. Plan early for succession or a business sale

Whether you’re preparing for a future sale, considering a management buyout or thinking about family succession, starting early gives you more choice and usually leads to better outcomes.

Questions to explore now include: What does a “sale ready” business look like for you? Is your ownership structure aligned with your future plans? Are you building sufficient personal wealth outside the company? Early planning helps avoid financial surprises and gives you more freedom when the time comes.

5. Build a personal financial plan for life beyond the business

Entrepreneurs often prioritise the company at the expense of their own planning. A well-structured financial plan can clarify when you can afford to step back, the income you’ll need later in life, how your investments should be structured and how to protect wealth for future generations. Good planning gives you options, whether that’s growth, a sale or simply more time.