More small firms expect to shrink than grow

18 Jul 2025

The proportion of small firms expecting to contract, sell or close outnumbered the percentage hoping to grow, the Federation of Small Businesses (FSB) has warned.

The share of small businesses who said they expected their business to shrink or close, or to sell up the business over the next 12 months was 27%. This outweighed the 25% who predicted their business would expand in the second quarter of this year.

It is the first time in the history of the Small Business Index (SBI) from the FSB that the proportion of small firms bracing for contraction, sale or closure outnumbered the percentage hoping to grow.

The FSB says that the gloomy finding likely reflects small business sentiment around the introduction of higher levels of employer National Insurance contributions and rises in the National Living Wage.

It also reflects fears around the impending Employment Rights Bill, which the FSB says looks set to impose a new raft of costs and risks onto the shoulders of small employers.

Tina McKenzie, FSB's Policy Chair, said: 'Confidence being so low and not showing any improvement since the start of the year, is bad enough.

'But add in the fact that stagnation and pessimism among small businesses spells huge risk for the overall economy, and the upcoming Small Business Strategy needs to be ambitious enough to meet the scale of the challenge facing the UK's small firms.'