UK businesses see home market as best place to start, scale and grow
Barclays’ Business Prosperity Index which analyses anonymised data from around one million UK business clients and research from 1,000 business leaders reveals diverging behaviour, with larger firms increasing longer-term lending and smaller firms relying more on shorter-term liquidity financing in the last quarter of 2025.
While economic uncertainty remains the greatest challenge businesses are facing, confidence in the UK is resilient. Six in 10 (58 %) back the home market as the best place to start, scale and grow a business and 57 % believe the UK is becoming a more attractive place to list.
To support UK growth, Barclays today launches its 2026 Business Prosperity Fund, with a £22bn lending commitment to help businesses invest and scale.
Key findings from the Q4 Index show:
93 % report higher trading costs, with energy, labour and supply chain expenses continuing to weigh on margins
- 80 % have passed on some cost increases to customers and 65 % expect to raise prices again this year
- Despite cost pressures, 86 % feel upbeat in their prospects and 65 % are confident in the strength of the UK economy
- 83 % expect revenues to rise in Q1 2026, with 27 % forecasting increases above 50 %
Larger firms push ahead as smaller businesses stay cautious
Barclays anonymised client data in Q4 shows cash inflows slipped 3.4 % year‑on‑year, signalling that subdued spending continues to weigh on income. At the same time, a two‑speed pattern of investment is emerging:
- Larger firms increased longer‑term borrowing by 8.7 % year-on-year, suggesting investment intentions remain despite broader uncertainty.
- Smaller firms however reduced their longer-term borrowing, while at the same time increasing overdraft usage by 2.5 %, pointing to tighter margins in the near-term.
This divergence between smaller and larger businesses mirrors an uneven confidence in the UK macroeconomic environment. Two thirds of large businesses (66 %) and over half of medium‑sized businesses (53 %) believe current economic conditions support long‑term growth, compared with just 12 % of micro businesses.
However, confidence in small business leaders’ own business prosperity over the coming year remains relatively high at 86 %, though this drops to 68 % for micros.
| Confidence in future business prosperity over coming years | |||
| Business size by employees | The next year | The next three years | The next five years |
| Micro (1-9) | 68 % | 66 % | 64 % |
| Small (10-49) | 86 % | 80 % | 78 % |
| Medium (50-249) | 91 % | 90 % | 89 % |
| Large (250+) | 92 % | 91 % | 90 % |
Abdul Qureshi, managing director of Barclays Business Banking said: “Smaller businesses have been operating cautiously, and the pressures they face are clear. Even so, many still see the UK as a place where they can innovate and grow.
“Our research shows a third of businesses believe the UK offers higher levels of innovation than other major markets, but over a quarter think it lags behind. These signals matter, and there is clearly more to be done. A priority now is helping smaller firms turn underlying confidence in their business into investment and tangible progress.”
Rising costs force firms to raise prices
Almost all businesses (93 %) report higher trading costs over the past year, with energy (85 %), labour (80 %) and supply chain expenses (78 %) continuing to weigh on margins.
In response, four in five (80 %) have passed on some cost increases to customers. On average, companies have passed on around 30 %, with larger firms more likely to do so (86 %).
Looking ahead, two in five businesses (65 %) plan further price rises this year, while only 17 % anticipate reductions. To maintain customer value, three in four (76 %) are turning to pricing innovations such as flexible payment terms (32 %), while others are focusing on efficiency measures to manage ongoing cost pressures.
85 % of all businesses cite energy costs as a pressure, rising to 90 % of medium-sized businesses, with over a third (34 %) reducing their energy usage to help manage costs. Reducing such operating costs is viewed as the most effective lever to support investment this year (37 %), rising to 44 % among large businesses.
Majority of business leaders still view the UK as the best global base for growth
Despite cost and confidence challenges, almost six in 10 businesses (58 %) believe that the UK is a more attractive place to start, scale and grow a business when compared to other major markets. Meanwhile, a similar proportion (59 %) say the UK is the best place to headquarter, compared to just 17 % and 14 % believing the contrary.
Additionally, London is seen as the best location to ultimately list or float, with 46 % of businesses preferring the UK to other markets and just 18 % seeing greater advantage abroad. Of those who agree, market reputation (43 %), access to capital (37 %) and a strong investor base (32 %) are the leading draws.
Forward-looking sentiment also remains broadly positive, with 55 % agreeing the UK is becoming a more attractive place to headquarter and 57 % saying it is becoming a more attractive place to list.
Matt Hammerstein, CEO of Barclays UK Corporate Bank, said: “Even in a period marked by caution and cost pressure, businesses are showing a clear belief in the UK as a place to grow. That confidence is encouraging, but there’s still a job to do in turning it into action.
“Our role now is to help businesses bridge that gap, by pairing their ambition with the specialist support and financial firepower available through our 2026 Business Prosperity Fund.”
Barclays Business Prosperity Fund
To support business to invest for growth, The Barclays Business Prosperity Fund is available for new and existing Business Banking customers and UK Corporate Banking clients across the UK to apply for lending and refinancing on existing projects. Businesses can find out more and read the full Q4 Index report at: home.barclays/businessprosperity.
£22bn is the total amount of lending Barclays has available to lend and support business growth among Business Banking and UK Corporate Banking clients in 2026. Subject to normal lending assessment, status and application. Terms and conditions apply.