For the first time in its history, the Federation of Small Businesses (FSB) has reported that more UK small firms expect to shrink, sell up or shut down over the next 12 months than anticipate growth—a worrying signal for the wider economy.
According to the FSB’s Q2 Small Business Index (SBI), 27 per cent of small businesses expect to contract, close or be sold in the coming year, outstripping the 25 per cent who are planning for growth. It marks the first time the balance has tipped towards pessimism since the index began.
In stark contrast, the first quarter of 2025 painted a far more optimistic picture. Back then, almost half (48 per cent) of small businesses expected to grow, with just 18 per cent bracing for contraction or closure. Now, nearly half of all respondents (49 per cent) say they expect to remain the same size—up from 34 per cent previously—suggesting a marked stall in ambition and activity.
The findings come at a pivotal moment as the Government prepares to publish its long-awaited Small Business Strategy. Industry leaders are urging ministers to ensure the strategy delivers concrete measures to boost growth and remove obstacles that are weighing heavily on the UK’s 5.5 million small firms.
Overall confidence among business owners has continued its downward slide, with the headline confidence index dropping to -44 points in Q2, down from -41 in Q1. The report attributes much of the gloom to mounting financial pressure from April’s rise in employer National Insurance contributions and the increased National Living Wage. Anxiety is also growing around the proposed Employment Rights Bill, which is expected to introduce further obligations and potential costs for small employers.
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