Business confidence has deteriorated among small and medium-sized enterprises, with companies reducing investment in response to tax increases and rising labour costs, a leading survey has found.
Quarterly research from the British Chambers of Commerce (BCC), polling more than 4,600 businesses across the UK, found only 46% of companies anticipated increased sales this year, the lowest level in three years. As reported by The Times, 24% believed their turnover would decline.
Both showed a declining trend from the BCC’s third-quarter survey, with the percentage of companies also reporting a fall in cash flow rising from 29% to 32%.
The research was conducted between November 10 and December 8, before and after the Budget, with SMEs making up 91% of those surveyed.
Tax increases remained their biggest concern, cited by 63% of companies, while businesses said rising labour expenses, not helped by new employment legislation, were their main cost pressure. The increasing costs of employing workers were noted by 72% of companies.
In response to persistent cost pressures, investment levels in plant, machinery and equipment were down for the fifth quarter in a row. Twenty per cent of businesses said they were scaling back investment, with the most widespread cuts coming from the hospitality, retail and manufacturing sectors. Around a third of companies in those sectors said they had cut their investment plans.
In a blow to the battle to control inflation, 52% of businesses also said they expected to raise their prices in the next three months, up from 44% in the previous quarter.
BCC head of research David Bharier said: “Our data shows more clouds have gathered over business confidence, and the outlook for SMEs in 2026 is unsettled.
“Firms tell us they are worried about tax, struggling to invest and fear they’ll have to put their prices up in the months ahead. Firms’ confidence in their turnover growth has been stuck stubbornly below 50% for the last 12 months.”
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