The percentage of UK small business owners predicting growth (33%) has dipped to a nine-month low, according to the latest quarterly data from Novuna Business Finance. Whilst 45% see Q1 as a standstill period, there is a four-year high in the percentage of small businesses saying they will contract by the end of March (13%) and the percentage of enterprises that fear closure in the next three months has hit a two-year peak (8%).

The findings are from Novuna Business Finance’s Business Barometer study, which has tracked the growth forecasts of more than 1,000 small business owners every quarter for the last 11 years. Following the Bank of England cutting interest rates and reducing its economic growth forecasts for 2025, the new Novuna Business Finance data reveals that UK small business owners are already gearing up for contraction, with major falls in growth forecasts already registered across many key regions – where there has been abrupt change since the start of 2025.

In London the percentage of small business owners predicting growth has plummeted from 57% to 39% in just three months – presenting a two-year low point in confidence for enterprises in the Capital (since Q2 2023

The North East was one of the regions that saw a post-election resurgence in small business confidence during the second half of 2025. This quarter, the percentage of North East small business owners that predict growth has fallen sharply back from 36% to 25%.

A similar picture emerges for the East Midlands, where growth forecasts have fallen from 37% to 31% since last quarter

Growth forecasts are a serious concern in the South West and Wales, these two regions now falling significantly behind all other UK regions (17% and 16%).

Scotland bucks the trend prevalent in England. For Q1 2025, the percentage of small business owners predicting growth has hit a five-year high at 36% (the highest figure in Scotland since Q3 2019).

Double Election Impact?

Whilst the latest data suggests the confidence boost that followed the new UK Government taking office last July has now worn off, the new US administration taking office has also been met with concern in recent weeks. An additional Novuna Business Finance survey found that more than seven in 10 small businesses (77%) said they were fearful of how the new US administration could have a ripple effect for UK small businesses in 2025. Chief among small business concerns were the possibility of tariffs on UK exports to the USA (43%) and concern over the impact on UK economic growth forecasts and interest rates (33%).

Sector Analysis

Whilst growth outlook held firm in many sectors, Q1 2025 saw significant falls in small business growth outlook for the manufacturing, retail, IT and hospitality sectors. Growth outlook in manufacturing fell to its lowest level since Q4 2023.

Joanna Morris, Head of Insight at Novuna Business Finance comments: “Over the last 11 years, our research suggests that small businesses are remarkably resilient when it comes to their quarterly growth forecasts. The fall for this quarter represents a reverse on a gradual upward trend over the previous six months. Of concern are signs of more small businesses predicting contraction for the next three months - and some even fearing closure.

“From the Business Barometer study over the last decade, it is clear that there are often fine margins between businesses that predict growth or contraction and decline."

"Now is a time for small businesses to be supported, so caution and contraction can be replaced by confidence and belief."

"At Novuna Business Finance, we are serious about helping established small businesses put plans in place to achieve their true potential and, midst the market uncertainty, small business confidence this year will be key to the new Government delivering on its pledge to deliver economic growth.”