Small Businesses Face Challenges in Twin-Speed Economy

New research from Simply Asset Finance reveals a stark contrast in growth expectations between UK businesses, underscoring the challenges for micro-businesses in particular.

While 55% of medium-sized businesses see potential growth from business rate cuts, only 6% of micro-businesses feel optimistic about their prospects. Instead, 53% cite rising NI contributions as a key growth barrier, and 46% fear the impact of potential capital gains tax hikes. Additionally, 7% of micro-businesses are uncertain about their future, compared to just 1% of medium-sized businesses.

Despite these challenges, some positivity emerges, with 19% of all businesses now more inclined to invest following the Government’s budget announcements, which include lower business rates for retail, hospitality, and leisure. Over half (53%) support the business rates reduction, while 48% back the fuel duty freeze and 46% applaud new infrastructure investments.

The findings highlight an urgent need for targeted measures to safeguard the UK’s entrepreneurial ecosystem and support micro-businesses navigating an increasingly divided economic landscape.

But a closer look at the data shows that smaller businesses and micro businesses are likely to fare much worse than medium-sized companies following Chancellor Reeves’ interventions.

The research reveals that medium-sized businesses are more likely to find that the announced policy changes will bolster their outlook and plans for 2025 than those at the other end of the spectrum. More than half (55%) see the business rate reduction as a growth opportunity, while 48% believe the fuel duty freeze will support their expansion. Infrastructure investments are also seen as key drivers, with 46% expecting transport spending to boost growth, and 43% viewing energy infrastructure improvements as essential. With these resources at their disposal, medium-sized businesses could be poised to leverage these policies for sustained success in the year ahead.

However the mood among smaller businesses, especially micro-businesses, is much bleaker.

Over half of micro-businesses (53%) believe rising national insurance contributions will hinder their growth, compared to 46% of small businesses and 40% of medium-sized businesses. Similarly, nearly half (46%) fear the impact of potential capital gains tax increases, a concern less pronounced among small (40%) and medium-sized (38%) firms. Adding to this, micro-businesses face the highest levels of uncertainty, with 7% unsure about their future—far higher than the 2% of small businesses and 1% of medium-sized businesses.

Mike Randall, CEO, Simply Asset Finance comments: “The initiatives introduced in the recent budget are a silver lining for medium-sized businesses, with many of the measures evidently enabling them to pursue growth with renewed confidence providing the resources and stability needed for innovation and expansion. However, there is a pressing need to extend similar support to micro-businesses, as they continue to bear the brunt of unique challenges and uncertainties that threaten their ability to thrive.

“The reality is that there’s no ‘one-size fits all’ policy for SMEs – nor for their financing either. Policymakers, lenders, and industry leaders must work together to provide the necessary support to help businesses of all sizes thrive, creating a more balanced and resilient future for the UK economy.

“For finance providers, it’s about flexibility and trust. Whether it’s by offering debt restructuring, showing pathways to investment, or exploring ways to help businesses manage through seasonal fluctuations, there are concrete steps that can be taken to support SMEs and help them grow despite the current uncertainties. Only by leveraging the resilience and entrepreneurial spirit of UK businesses, can we unlock the potential of businesses of all sizes, broadening support and fostering a balanced and thriving economy.”