The percentage of UK small businesses predicting growth has dropped for the fourth consecutive quarter, reaching levels last seen during the 2020 lockdown, according to Novuna Business Finance.
The decline follows a year after the Labour Government took office, with small business confidence falling from an initial 35% ‘Election Bounce’ to a five-year low of 26%.
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Often seen as the hub of small business growth, London experienced a significant drop in confidence.
The percentage of businesses in the city predicting growth in the next three months fell to 37%, down from 48% in the previous quarter.
Across other UK regions, notable declines occurred from the first quarter (Q1), with the north-east dropping from 42% to 29%, the West Midlands decreasing from 36% to 24%, and Scotland declining from 29% to 22%.
The findings are based on the July 2025 Business Barometer study by Novuna Business Finance, which tracks growth forecasts from a representative sample of more than 1,000 small business owners each quarter.
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By GlobalDataFor the next three months, growth outlooks vary by industry sector. While manufacturing and construction sectors showed modest recovery from record lows in Q1 2025, real estate, transport, and distribution sectors saw significant declines.
Seasonal businesses in agriculture, hospitality, and leisure also reported sharp falls in growth outlook.
Novuna Business Finance’s head of insight Jo Morris said: “This time last year, the election bounce of a new Government taking office saw an immediate rise in small business confidence – with the percentage predicting growth rising from 30% to 35%. Ever since then, small business growth forecasts have fallen over four consecutive quarters. The new low of 26% for the three months to 30 September is on a par with the lockdown months of 2020.
“Our new report on small business outlook over the last year looks closely at how recent market developments – such as the NI hike for employers, uncertainty over tariffs and fears over autumn tax rises – have played out on small business confidence and their growth predictions.”
Additionally, a February report from Novuna Business Finance revealed that workplace concerns are causing sleepless nights for small business owners.
Nationally, 82% of business owners reported experiencing broken sleep due to business worries, up from 75% a year ago.
