Three-quarters of SMEs confident in own growth despite government policy concerns
New data published today by leading alternative lender ThinCats shows that ahead of the chancellor’s Budget later this month, confidence among small and medium sized enterprises (SMEs) in the government’s ability to create an environment for growth has dropped in the past year, slipping from almost half of businesses (49%) to 39% today.
While confidence is much higher among mid-sized companies (employing 50-249 people) with 50% expressing confidence, the data among microbusinesses (1-9) 26% and sole traders (23%) shows real dissatisfaction within the private sector.
The research forms part of ThinCats’ latest insight to better understand sentiment, appetite for finance and the wider business environment for UK SMEs. While there is disapproval of the government’s policy approach, there is confidence among business leaders in achieving growth over the next 12 months for their own companies. Three-quarters (75%) are hopeful heading into 2026, again this is significantly higher among mid-sized businesses compared to smaller firms.
When asked what the biggest challenges to growth are, four-in-ten (39%) point to the general economy with consumers and businesses choosing not to spend or delaying investment. There is also understandable frustration and concern from added costs from National Insurance and national minimum wage increases (36%) alongside inflation (36%). Over one-quarter (26%) also highlighted higher energy and fuel costs with 22% also frustrated at the inability to recruit skilled workers.
Again, there are variations across businesses by size. Inflation, skills shortages, balancing investment and global tariff uncertainty are challenges being felt far more acutely among businesses operating in the mid-market, while the weak economy and access to finance are more acute among smaller businesses and sole traders.
When asked if last year’s Autumn Budget had a negative impact on their business, despite the additional costs and negative sentiment, only 35% said it negatively affected their business with a further quarter (26%) saying it had no impact. Of those businesses who have been negatively affected, 40% said they have paused on recruitment, over one-fifth (21%) have paused on investment and 20% have cut headcount. 13% are using more freelancers and contractors.
Use of AI and automated tools has also surged since the Budget. There have been incremental increases across all business sizes of services ranging from chatbots, client relationship management (CRM) systems, inventory optimisation to cloud accounting. Generative AI tools such as ChatGPT and Co-Pilot have seen the biggest leap of 27% followed by finance and banking software (19%) and CRM systems (16%). 26% said they have not explored these tools yet, this was highest among sole traders (58%) compared to only 12% of mid-sized businesses.
When asked what measures they would most like to see in this month’s budget, the most popular response was improving access to finance for small businesses (22%). While improbable, given the economic picture, the same number said they’d like to see the national insurance hikes reversed. One-fifth (20%) want the Government to improve trade relations with the EU. Among mid-sized businesses, there is a desire for support to improve digital skills as well as helping more businesses to expand overseas through UK Export Finance.
Mike Hackett, chief commercial officer, ThinCats: “There have been huge challenges this year from tariff uncertainty, cost inflation and notwithstanding, higher costs as a direct result of last year’s Budget. While there has been understandable frustration at higher taxes, it is important to remember that businesses do not sit and wait for the latest announcement. They’re focused on growing their business and it’s interesting and welcome to see attention on productivity gains through AI tools or exploring exporting.
“We are seeing appetite for funding across buy and build and refinance. Businesses understand the fiscal picture better than most and hope the burden will not fall upon their shoulders.”