However, SMEs remain cautious, with just over half (56%) feeling positive about their financial prospects. This guarded stance persists despite economic improvements, such as the recent interest rate cuts by the Bank of England.

Recession fears at record low

Concerns about economic instability have eased significantly, with only 34% of brokers reporting that their SME clients are worried about a potential recession—down 7 points since Q1 2024 and 37 points from Q2 last year. Official data released in August showed a 0.6% growth in the UK economy during Q2, indicating continued recovery.

For the first time since the Index began, none of the brokers surveyed cited "closing down the business" as a primary concern for SMEs, marking a 3-point drop from Q1 2024. This suggests that existential worries among small businesses have eased amid greater economic stability.

Political uncertainty remains a challenge

Despite improving economic conditions, political uncertainty still looms. Over a third (35%) of brokers believe the new Labour Government will positively impact SMEs, while 33% expect no change, and 32% see it as a potential negative.

Political concerns among SMEs are also rising, with nearly 9% of brokers identifying political uncertainty as the top issue for small businesses—up 6 points from the last quarter, marking the highest level recorded.

Positive outlook from iwoca

Colin Goldstein, Commercial Growth Director at iwoca, noted: “Small businesses across the UK have endured a difficult two years, and our research with SME experts suggests there are signs of recovery and stability ahead. The fall in SME anxieties about the economy signals brighter months to come for small businesses, while the pinch of inflation and high interest rates eases.”