Economic uncertainty triples as top SME concern

Following the introduction of a fifth Prime Minister in four years and an Autumn Budget on the horizon, economic uncertainty has surged to become the most commonly cited challenge facing UK small business owners this year, according to a new report from Simply Business.

SMEs are the backbone of the UK economy, responsible for 60% of all private sector employment and £2.8 trillion in turnover each year. Yet Simply Business’s new SME Insights Report, drawing on a combination of surveys conducted across 2026, reveals a sector under considerable strain, though one that continues to show notable resilience and passion.

Economic uncertainty weighs on small business owners

When asked to name their three biggest challenges, small business owners’ answers have shifted markedly since last year.

Economic uncertainty has surged to the top, with 48% now naming an unpredictable economy as one of their three biggest barriers, rising from the 16% who said so in 2025. This is followed by a lack of or uncertain consumer demand (41%) and high running costs such as energy bills (35%). Despite these concerns, confidence appears to have improved slightly, with 2 in 5 (43%) expecting the economy to worsen over the next 12 months, down from 50% in 2025.

Creating the conditions for growth

In the current trading environment, cost pressures remain a defining feature of small business life. A survey conducted ahead of this year’s Spring Statement found that 82% of small business owners saw operating costs rise in the 12 months to February 2026, with a third experiencing increases of between 11% and 30%.

When asked what would help most, in the same Spring Statement survey, 24% called for a higher VAT registration threshold and 27% for a reduction in corporation tax.[1] Almost one in five (18%) said they would hire more staff if the government reduced the tax burden on their business, highlighting the potential of small businesses to support employment growth if the right conditions are in place.

Ryan Sullivan, founder of bespoke carpentry business Swyft Services, said: “For me, general stability and reducing the cost of employing people would make the biggest difference. I want to grow and create jobs, but taking on my first full-time employee is a huge financial commitment. Anything that reduces that initial cost and uncertainty would make it much easier for a small business to expand.”

Purpose and resilience remain strong

Despite the pressures, small business owners remain remarkably resilient. 87% still feel a sense of personal meaning and accomplishment from running their business, and three quarters (75%) say the freedom of being their own boss is the most rewarding part of the job.

The driving force behind starting a business has also been revealed to be autonomy and personal fulfilment, rather than pure financial gain. Top motivations reported by small business owners include being your own boss (57%) and pursuing a personal passion (34%), with just 22% citing financial necessity as their reason for starting a business.

A separate Simply Business study among UK adults, conducted in January 2026, also revealed that similar motivations had driven a rise in side hustles. Nearly half (45%) reported that they are running a side hustle, with 24% started theirs in the previous year.

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Fay Phillips-Jones, Founder and HR Career Coach at Coaching With Fay, said: “Small-business ownership can make you feel successful and financially vulnerable in the same week. There are still moments when I wonder where the next payment will come from because income can be uneven. Then a former client recommends me to somebody new, and that expression of trust provides both commercial reassurance and an enormous emotional lift. I never take it for granted.

“More proportionate tax and National Insurance support for microbusinesses would make a meaningful difference, particularly during the early stages of growth. A tax bill that may look modest within a larger organisation can remove a microbusiness’s entire budget for training, systems or professional support.”

Simply Business UK CEO, Julie Fisher said: “As a country, we’ve now seen five prime ministers in four years. This unpredictability in government is making it difficult for businesses to plan ahead, with 65% saying frequent policy changes impacts their long-term planning. It’s encouraging to see the government considering how to tackle the cost of living and business rates. But they need more than promises.

“This year’s SME Insights Report continues to show the impressive resilience and adaptability of small business owners in the UK. It’s clear that many owners feel connected by something deeper, with the majority stating that the freedom to be their own boss is what they find most rewarding. I’m backing our nation’s small business owners to find a way to win and come out on top.”