Small business growth hopes plunge – Chancellor must act in Budget
- New figures reveal nearly one in three small firms expect to shrink, sell up or shut down in the next 12 months, while just 18 per cent expect to grow.
- More than half suffered falling revenues in the last three months, according to the latest research from the Federation of Small Businesses (FSB).
- FSB challenges Rachel Reeves to reduce the small business tax burden and the impact of employment cost hikes.
CONFIDENCE and growth hopes among the UK’s small business community nosedived further in the third quarter of 2025, according to newly-published research.
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%).
Ann Scott, Regional Business and Stakeholder Manager (Essex) at Federation of Small Businesses (FSB), said:
“It’s deeply concerning that less than 20% of small businesses expect to grow over the next year, while almost a third are considering downsizing, selling, or closing altogether. This should serve as an urgent wake-up call for the Government.
We’re urging Rachel Reeves to use the upcoming Budget to deliver bold measures that back entrepreneurs, cut the tax and employment cost burdens, and unlock small business growth. The success of our economy depends on it.”
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.
“If small businesses are forced to shrink or shut their doors, it triggers a dangerous chain reaction — fewer jobs, less tax revenue, and more strain on public services.
This Budget is a turning point. The Chancellor must show real support for small businesses, or risk stalling the UK’s economic recovery altogether.”
