For the first time, more UK small firms expect to shrink, sell, or shut down than anticipate growth. The FSB's Q2 Small Business Index shows 27% expect contraction versus 25% planning for growth. Confidence has dropped with the index falling to -44. Factors contributing include rising National Insurance and the National Living Wage. Additionally, over 40% anticipate revenue declines, while hiring sentiment remains low, with more firms cutting jobs than hiring. The government is expected to unveil a Small Business Strategy to support these firms.
In stark contrast, the first quarter of 2025 painted a far more optimistic picture. Back then, almost half (48 per cent) of small businesses expected to grow, with just 18 per cent bracing for contraction or closure.
Overall confidence among business owners has continued its downward slide, with the headline confidence index dropping to -44 points in Q2, down from -41 in Q1.
The report attributes much of the gloom to mounting financial pressure from April's rise in employer National Insurance contributions and the increased National Living Wage.
Industry leaders are urging ministers to ensure the strategy delivers concrete measures to boost growth and remove obstacles that are weighing heavily on the UK's 5.5 million small firms.
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