UK Small Business Confidence Plummets Amid Economic Uncertainty

UK small business confidence has taken a sharp downturn in the third quarter, with nearly one-third of firms anticipating downsizing, selling, or shutting down in the coming year. Only 18% expect to expand, according to the Federation of Small Businesses. Weak growth, high taxation, and rising employment costs are driving the bleak outlook.

The pessimism threatens to reduce spending and investment ahead of the UK budget. Tina McKenzie, FSB policy chair, warns of a "vicious cycle" where shrinking businesses lead to lower tax revenues, higher unemployment, and increased strain on public resources. The uncertainty is particularly acute in the housing sector, where over 40% of developers predict declining housing starts through late 2025 as firms await tax clarity from the November budget.

Knight Frank's survey of 60 homebuilders suggests budget ambiguities could disrupt development pipelines into 2026. The Institute of Directors' business confidence index reflects the gloom, registering minus 74 in September—a stark indicator of deteriorating sentiment among UK enterprises.