UK Small-Business Confidence Slumps Further As Budget Fears Bite

Daniel Carter

Summary:

Confidence across Britain's small businesses plunged in the third quarter, according to a new survey.

Confidence across Britain's small businesses plunged in the third quarter, according to a new survey, underscoring the anxiety the country's entrepreneurs have around higher taxes in next month's budget.

Nearly a third of small companies — a record high — predict they'll downsize, sell up or close down in the next year, according to the research by the Federation of Small Businesses. That compares to just 18% that expect to expand in that time.

It's the latest evidence that businesses are under strain ahead of the budget, with the prospect of higher taxes weighing on the minds of small business owners. Firms are feeling the squeeze from weak growth in the UK, the country's tax burden and higher labor costs, the FSB said.

Small business sentiment is a key indicator as these firms employ roughly three-fifths of the UK's private sector workers. Weaker confidence and shrinking growth expectations risk further denting the economy ahead of the budget, with firms reining in spending and investment.

"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," said Tina McKenzie, policy chair at the FSB.

The survey of nearly 1,500 business owners follows official data this month showing that company insolvencies in the first nine months of 2025 are broadly in line with 2023, when they hit a 30-year high. Most cases were voluntary liquidations, underlining how sustained cost pressures are forcing smaller firms to shut up shop.

As well as entrepreneurs, working people could face the prospect of higher taxes. Prime Minister Keir Starmer refused to rule out raising income tax, national insurance or value added tax at the budget, suggesting the government may break its election manifesto promises to plug a growing hole in the country's finances.

Source: Bloomberg Europe

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