Small business confidence in the UK has fallen to multi year lows

UK small business confidence has dropped sharply in mid‑2026, with multiple major surveys showing firms are increasingly worried about costs, demand, and geopolitical instability. Confidence is now at its lowest point in several years, and most indicators suggest SMEs are becoming more cautious about investment, hiring, and future sales.

🔍 Key findings from the latest reports

1. Confidence at a near four‑year low

The ICAEW Business Confidence Monitor shows confidence at -14.6, the lowest since Q4 2022, marking six consecutive quarters of negative sentiment. Firms cite geopolitical risks, rising labour costs, and energy prices as major pressures.

2. Business activity and demand weakening

UK business activity fell to 26% in June 2026, the lowest since early 2025. Companies report a “triple squeeze” of labour costs, tax uncertainty, and weak customer demand.

3. Investment sentiment collapsing

Only 17% of firms plan to increase investment — the lowest level since the pandemic. Hospitality and retail are cutting back the most, with over a third reducing investment plans. Inflation has re‑emerged as the top concern for 66% of businesses.

4. Rising cost pressures

Energy, fuel, and labour costs remain major concerns:

• 64% worried about energy prices
• 68% worried about fuel prices
• Accommodation/food services show the highest concern at 88% These pressures are contributing to reduced resilience and lower confidence.

5. Geopolitical instability worsening outlook

The Iran conflict has significantly dented confidence, with 65% of companies citing geopolitical risk as a growing challenge. Transport worries have doubled due to rising fuel prices and supply chain disruption.

🧭 What this means for UK small businesses

Small businesses are entering a period of defensive behaviour, focusing on survival rather than growth. Many are:

• Delaying investment
• Reducing spending
• Preparing for prolonged uncertainty
• Reporting weaker expected sales and profits for the year ahead

Confidence is lowest in business services, property, and construction, while energy, water, and mining remain the only sectors with positive sentiment.