Almost one in three UK small businesses are expected to shrink or close, according to the Federation of Small Business (FSB).
The FSB points to what they call a “vicious” cycle of low growth, and fears around what will come out of Number 11 Downing Street in the next Budget.
The upcoming budget announcement has been described by owners in the FSB survey as “make-or-break” moment, with net confidence dropping to negative-58 in Q3 2025, falling even further than the negative-44 in Q2, and the second lowest figure recorded by the FSB since the start of the Covid-19 pandemic.
Only 18% of businesses surveyed expect to see growth in the next twelve months. As many as 6% expect to close, amounting to 300,000 business closures in real terms in the next 12 months.
The policy chair of the FSB, Tina McKenzie, warned that a wide combination of factors were leading towards a difficult period for the sector she described as “the backbone of the UK economy”
“Millions of small businesses shrinking, closing, or selling up instead of growing means a vicious cycle of a lower tax take, higher unemployment, and greater demands on the state all exacerbating each other in a downward spiral,” Ms McKenzie said.
“The stakes couldn’t be higher. Without small businesses economic growth is a lost cause. Small firms will be looking for positive backing.”
34% of respondents said that labour costs were contributing too their lower growth projections.
Many were also concerned over the level of protections offered by the upcoming Employment Rights Bill, which would strengthen sick pay protections, support the right to sue for unfair dismissal from the first day on the job, and provide union leaders access to offices on a regular basis. Failure to keep up with this last provision could result in fines of up to £75,000.
The previous week saw the FSB join with twelve other businesses to urge the House Of Lords to limit these protections to after the first six months of employment.
