Three-quarters of SME leaders are confident about their own growth prospects heading into 2026, yet only 39 per cent trust the government to create conditions for that growth to happen, says Mike Hackett
Here’s the paradox keeping Britain’s economy afloat: three-quarters of SME leaders are confident about their own growth prospects heading into 2026, yet only 39 per cent trust the government to create conditions for that growth to happen. Worryingly, we’ve seen a ten-point drop in confidence over the past year, which tells you everything about the state of play between Westminster and UK private businesses.
This disconnect matters because SMEs aren’t just economic statistics — they’re the engine of UK employment and growth. If we want the economy to grow, then they need to be allowed to flourish, not held back.
As a lender to mid-sized SMEs and reflecting on our latest research and recent conversations with business owners, there is a high degree of frustration in what they are seeing. On one hand, they can see a lot of good policy work is taking place behind the scenes. Whether it’s improving trade, access to finance, setting out infrastructure plans or publishing an industrial strategy, all of these measures improve the business environment. What they cannot fathom is why much of the costs are borne by them and fear the Government will come back for more.
Over the past decade, businesses have managed issues from Brexit, Covid, Ukraine, inflation and a higher rate environment. While many businesses absorbed the tax increases from last year’s Budget without major disruption, it is fascinating to see the response from those that were affected.
Faced with higher employment costs, 40 per cent of affected businesses have frozen recruitment and 20 per cent have cut headcount
Faced with higher employment costs, 40 per cent of affected businesses have frozen recruitment and 20 per cent have cut headcount. But rather than retreating, we’re seeing a pivot towards technology. When hiring becomes unaffordable, automation becomes essential.
More businesses, especially mid-sized companies are looking towards AI and automation for productivity gains. That can be the basics from Generative AI or cloud accounting software to chatbot functions, automating manufacturing and robotics. Companies are asking themselves – how do we become more efficient, whilst growing? That might mean pausing recruitment to free up capital for technology investment. We may be in the early stages, but by making people more expensive to employ, we’re hastening the march toward AI-powered productivity.
What do businesses want?
Looking ahead to the Budget, what do businesses actually want? Perhaps unsurprisingly, but what’s equally unlikely, is the desire for the Chancellor to reverse the National Insurance increases. Otherwise, there’s a desire to improve access to finance – the gGovernment is consulting on this, but it needs to get it right. I’m interested that mid-sized businesses are keen to improve digital skills and business support to export.
There are clearly difficult challenges and expectations for government to manage. Before this government was elected, many businesses took a wait-and-see approach in anticipation and hope of the opportunities that lay ahead. Sadly, much of that expectation hasn’t come to pass and we’re seeing quite a lot of activity as some companies expect to be hit with more taxes.
The question I’d be asking government is – what are you doing to help businesses grow?
Our data suggests that they’re backing themselves, but they’re less confident in how the government is trying to help them.
Mike Hackett is chief commercial officer, ThinCats