Worst full-year period for small business growth forecasts since 2020
Only 26% of UK small businesses say they are forecasting growth for the final three months of 2026, with 50% forecasting no change in trading outlook – and 23% of enterprises fearing they will either contract or struggle to survive the winter months, according to new research from Novuna Business Finance. Further, 2026 as a full-year is the first time in more than a decade that the percentage of small businesses predicting growth has remained below 30% for a full 12-month period.
These new findings, for the period October to December 2026, come at a time of economic volatility, with the average price of diesel rising above £2 a litre for the first time and growing concern over the impact of government borrowing on inflation and interest rates. Add to this, many small businesses are also worried about what could be announced in the Budget later this month – with the new Novuna Business Finance poll revealing that 53% of small businesses said further hikes to National Insurance would negatively impact the growth outlook and finances of their business – with 44% also worried about the impact of potential rises in Corporation Tax.
The Business Barometer study from Novuna Business Finance – which polls a nationally representative sample of 1,000 business owners – has tracked small business growth forecasts every quarter since 2014. Whilst quarter-on-quarter changes in growth outlook are often gradual, the trends over time paint a concerning picture of decline. For the period Q1 2017-Q1 2020, the quarterly average for the period was 37% of small business owners predicting growth. For the period Q1 2022 to Q1 2025, the average fell to 33% – and for the quarters since Q2 2025 the average percentage of small businesses predicting growth has fallen further to 26%.
In mid-2025, the percentage of small businesses predicting growth dipped below the 30% level for the first time since the Covid lockdown era (Q1 2021) but, since that moment in 2025, small business growth forecasts have never bounced back above 30%, remaining in the 20s for seven consecutive quarters.
Regional highlights: Contrasting fortunes for the two Number 10s
Compared to small business growth outlook at the start of the year, the Novuna Business Finance tracking data revealed slight improvements in six UK regions, no change in one and annual falls in four locations. Over the course of the year the percentage of small businesses forecasting growth saw its biggest rise in the North West (from 21% to 29%), with the biggest fall registered in London. For small businesses in the Capital, the latest Novuna Business Finance data reveals a fourth consecutive fall in small business growth forecasts (from 40% in January to 32% in October) – which is now at its lowest level since the Covid lockdown year of 2020 (31%).
Sector highlights
Comparing growth forecasts between the start and end of 2026, in seven sectors there were falls in the percentage of small businesses predicting growth – with sharp falls in agriculture property, medical and legal services – whereas there were annual rises in transport, IT/telecoms, education and leisure/hospitality.
Set against growth forecasts in the manufacturing and construction sectors remaining flat for the year, the transport and distribution sector saw an annual rise in small business growth forecasts. This rise could be delicate given the challenging context of rising costs, with 62% of small businesses telling Novuna Business Finance that any further tax rises for petrol or diesel vehicles would negatively impact their growth plans.
With the Christmas trading period ahead, small business growth outlook in the retail sector (27%) was up on last quarter (21%) but was down overall on the start of the year (32%) – a sector whose small business growth outlook has been volatile since the Covid lockdown era and the cost-of-living crisis.
Jo Morris, head of insight at Novuna Business Finance comments: “We were surprised to see small business growth forecasts fall below the 30% level during summer 2025, but the real concern since then is it hasn’t bounced back to its usual level in the mid-thirties. 2026 is the first year on record in the Business Barometer in which the percentage of small businesses predicting growth has stayed at around 26% for the whole year. The challenges seem most profound among younger and start-up businesses, with only 17% predicting growth for the final three months of 2026. More established enterprises remain relatively resilient. As we look ahead to 2027, we will carry out further research to compare the growth outlook of start-up, established and mature businesses.
“Our quarterly research this year shows that many small businesses are working hard to absorb the pressures of rising fuel and energy costs. Many are also concerned about how further tax, inflation and interest rate changes could impact their growth plans. At the same time, the majority of smaller businesses have not yet fully worked through whether and how AI could practically help business growth.
Despite all the headwinds, what we have seen since the Covid era and the cost-of-living crisis is that small business owners are resilient. They dislike uncertainty, but they find ways to adapt, innovate and pursue growth. Looking ahead to 2027, the UK’s growth ambitions depend heavily on their success. The autumn and winter months are an important time to step up and back UK small businesses. At Novuna Business Finance, we continue to support established businesses by helping them invest in essential assets, preserve cash flow and ease pressure on other areas of their budget.”