FSB Voice of Small Business Index
Quarter 2, 2025
Infographics SBI Q2 2025
“Confidence stays in firmly negative territory, with a small drop from Q1 ”
26.6%
of small businesses expect to contract (downsize, close or sell up) over the next twelve months, while only 24.8% expect to grow – the first time in the history of the SBI that growth expectations have been net negative
51.3%
of small businesses rate the overall availability and affordability of new credit for small businesses as poor
18.7%
of small businesses expect to reduce the number of people they employ over the next three months, while only 8% expect to increase their staff numbers
FSB Foreword
After a disappointing start to the year in Q1, hopes that the second quarter might see an uptick in performance and sentiment among small businesses were not realised. The headline confidence measure for Q2 is, at -44.1, a few points lower than Q1’s reading of -40.7, and is the second-lowest result outside the COVID pandemic.
GDP in April and May disappointed, with falls of 0.3% and 0.1%, with growth forecasts for the rest of the year downgraded to boot. Anaemic or non-existent growth spells trouble for small firms, who are the most vulnerable to downturns and falls in consumer confidence.
The consumer-facing sectors of wholesale and retail and accommodation and food services were especially downbeat in the second quarter, with readings of -54.7 and -75.2 points respectively. These sectors are labourintensive, and are likely to have been especially hard-hit by the introduction of hikes in employers’ National Insurance contributions and in the National Living Wage at the start of April.
The new barriers to employment are very likely a factor behind the fall in the proportion of small firms predicting that their staff numbers would increase over the next three months to 8.0%, the lowest result outside COVID times, under half the proportion who said they would decrease their employee numbers, at 18.7%. Taken across the small business population as a whole, this spells real trouble for employment levels, with small businesses employing around three fifths of the private sector workforce. The Government has set itself a target of raising the employment rate to 80% and will need to think hard about how to encourage small firms to take on staff if it wants to achieve this worthy and very important goal.
Although the Bank of England base rate was cut in May, to 4.25%, small firms are still negative about the availability and affordability of credit, with 51.3% of businesses rating the credit environment as poor. Furthermore, 24.3% of successful credit applications were offered an interest rate between 11-20%. Late payments were experienced by nearly two thirds of small businesses (64.7%), with the pain exacerbated by high interest rates.
Taken altogether, the most startling – and potentially worrying – result from the SBI for Q2 was that, for the first time in the index’s history since 2010, the proportion
of small firms anticipating growth over the coming 12 months was outweighed by the proportion bracing for contraction (in the form of downsizing, selling up, or closing the business), at 24.8% and 26.6% respectively. Around half of small businesses (48.6%) will be working hard just to tread water and remain the same size. This shocking finding should set loud alarm bells ringing within the Government as it begins to gear up for the autumn Budget. Without small businesses being confident overall that they will expand over the coming year, a vital layer of economic activity will crumble away, with potential ramifications that reach far beyond the consequences for individual firms.
The Small Business Plan, launched in July by the Prime Minister at an event in partnership with FSB, covers everything from late payments to personal guarantees and better procurement processes, and much more besides. Drawn up thanks to close dialogue with FSB, the Plan sees the Government fulfil a manifesto promise, based around FSB’s long-term campaigning on late payments, to introduce tough new rules and proper legislation to bring an end to this pernicious practice, which robs too many small firms of their financial stability and their dreams of expansion. We need to see the measures included in the Plan given concrete form in the forthcoming King’s Speech, as part of a Small Business Bill.
It was a real pleasure working with Ministers and officials on the Plan, to deliver something that will be transformative to small businesses’ fortunes. We now need that same spirit of cooperation and partnership to carry over to the discussion around the Employment Rights Bill, to protect small business job creation and self-employment, and to deliver an Autumn Budget which unleashes small businesses’ productivity.
Martin McTague, National Chair
Tina McKenzie, Policy Chair
Economist’s View
The UK economy has been hit by a barrage of headwinds in recent months. On the domestic front, both businesses and consumers faced rising costs, squeezing margins and spending power. Meanwhile, policy changes on the other side of the Atlantic have left the economy exposed to international volatility. These factors have contributed significantly to the negative value on the FSB Small Business Index in Q2.
Q2’s reading was the fifth consecutive sub-zero value. At -44.1, it was also the second-largest value by magnitude in this recent negative series. Together, these factors suggest that negative sentiment is broad-based amongst small businesses and proving difficult to shift.
The downside factors affecting the economy as a whole are corroborated by the latest survey results. A net balance of 16.8% of businesses selling abroad reported a decrease in the value of their exports over the quarter, up sharply from 6.0% in Q1. This clearly reflects the impact of US trade policy, with tariffs having been imposed on UK goods. The Trump administration’s back and forth has also left lingering uncertainty, which has contributed to an expectation of further decline in export value looking forward, reported by a net balance of 14.4% of respondents.
Small businesses continue to report widespread cost increases. A net balance of 79.6% stated that their operating costs increased in Q2 relative to the same period last year. Amongst drivers of cost changes, taxation and labour were most frequently mentioned by respondents, and both of these categories recorded sharp increases in their citation rate relative to Q1. Increases to employers’ National Insurance contributions, a tax on employment, came into effect from April, rationalising these trends in the data. The changes to the National Minimum and National Living Wages will have also had an effect. Notably, sectors such as retail and hospitality, where low-paid employment is more prevalent, were more likely to cite labour costs as a source of cost increases than was the case for all sectors.
The most concerning aspects of this quarter’s results relate to businesses’ future expectations. A net balance of -1.8% of respondents expect to grow this year. This is the first negative reading on this metric in the history of the Small Business Index. Less than a quarter (24.8%) of
small businesses now expect to grow over the coming year, down sharply from nearly half (47.8%) just three months ago. Anticipated barriers to growth focus on the poor momentum of the economy as a whole, as well as areas affected by recent policy changes. Consequently, near-term expectations surrounding investment and revenue are all firmly negative. Expectations for a lack of growth are particularly prevalent amongst consumerfacing industries, which are disproportionately impacted by poor demand conditions, as well as the aforementioned cost increases.
Battling cost pressures, small businesses are planning to take action to keep them in check. A net balance of 10.7% expect employment levels to decrease over the coming quarter, suggesting that jobs are at risk. Meanwhile, 38.5% of businesses stated that they expect to freeze or cut pay on average over the coming year. This is the largest share on this metric since Q2 2021, when the economy was still facing significant uncertainty from the pandemic.
The sentiments expressed by small businesses in the latest edition of this report support Cebr’s view of the expected direction of the economy. We predict exports, which have fallen in Q2, to remain subdued as a result of trade policy volatility. Our GDP nowcast for Q2 points to a sharp slowdown in growth, which is projected to remain subpar for the rest of the year. We anticipate firms’ costcontrolling measures to contribute to a further loosening of the labour market, characterised by a rising unemployment rate and a slowing rate of earnings growth. If these dynamics indeed prevail, it may well be some time before the Small Business Index returns to positivity.
Sam Miley, Head of Forecasting and Thought Leadership
Executive Summary
Key findings this quarter:
• The Small Business Index (SBI) fell to -44.1 in Q2 2025, down from -40.7 in Q1 2025. This firmly negative SBI reading reflects heightened concerns over the UK’s weak economic performance, compounded by rising labour costs and a heavier tax burden following the implementation of the Autumn Budget changes in April.
• All UK regions recorded a negative SBI reading in Q2 2025, reflecting widespread business pessimism. Five recorded a lower reading this quarter compared to the previous.
• Accommodation and food service businesses were the most pessimistic amongst sectors, with an SBI reading of -75.2. Pessimism was less severe in the information and communication, manufacturing, and wholesale and retail trade sectors compared to Q1, though sentiment remained negative overall. All other sectors reported more widespread pessimism.
• In Q2 2025, the net balance of small businesses reporting revenue growth was -26.8%. Expectations for future revenue growth worsened, with a net balance of -14.8% anticipating an increase in revenue over the next three months, down from -8.4% on the previous reading.
• The export environment deteriorated further, as the net balance reporting growth stood at -16.8% in Q2 2025. A net balance of -14.4% of exporting businesses anticipate growth in Q3 2025, as US tariff tensions are expected to persist, putting the index value in negative territory.
• The net balance of small businesses reporting an increase in operating costs fell marginally to 79.6% this quarter, following two consecutive quarters of increases. Despite the minor improvement, this share remains historically elevated. Labour, utilities, and the tax burden are cited as the primary drivers of rising costs for small businesses.
• Small business headcounts have contracted on net for the thirteenth consecutive quarter. Expectations for Q3 remain subdued, as recent changes to employers’ National Insurance contributions and wage floors present cost pressures. The poor outlook is further supported by signs of a loosening labour market, including declining vacancies and moderating wage growth.
• The share of small businesses aspiring to grow over the next twelve months decreased to 24.8% this quarter, with the share expecting to contract reaching historically high levels. Together, these findings produced a negative net balance for growth expectations for the first time in the history of the Small Business Index.
• The share of credit applications which were unsuccessful decreased to 35.7%. This was despite the share of small businesses applying for credit increasing to 15.2% in Q2.
• Small businesses’ perceptions of credit availability and affordability improved marginally over the quarter, but remained firmly negative. The credit index increased by 1.6 points to -30.7.
• The net balance of small businesses expecting to increase investment fell further in Q2, reaching -10.0%.
UK Macroeconomic Overview
Subdued start to 2025
According to data from the Office for National Statistics, the economy contracted by 0.1% in May. This followed a contraction of 0.3% in April. Overall, economic performance has been sluggish in 2025 thus far with growth recorded in only two months of the year. Growth of 0.5% was recorded in the three months to May, relative to the previous period.
Over the three months to May, the service sector was the primary contributor to the increase in GDP, expanding by 0.4%. Production and construction output grew by 0.2% and 1.2% in the three months to May, respectively.
The UK economy continues to face multiple headwinds, including elevated inflation, geopolitical uncertainties, and a cooling labour market.
As a result of these factors, Cebr forecasts another year of subdued GDP growth, with the economy expected to expand by 1.2% in both 2025 and 2026. These rates remain below the pre-pandemic trend, which saw growth averaging 1.8% per year or 2.3% when excluding the years affected by the global financial crisis.
Figure 1: Monthly growth rates by sector of the UK economy, latest three months on previous three months
Source: Office for National Statistics
Small Business Index
Small Business Index remains negative for fifth consecutive quarter
The Small Business Index (SBI) declined to -44.1 in Q2 2025, down from -40.7 in the previous quarter. This marks the fifth consecutive quarter in negative territory, underscoring the continued pessimism among small businesses. While the share of firms expecting conditions to worsen fell slightly, from 47.3% in Q1 to 45.4% in Q2, the overall sentiment remains firmly downbeat, with more businesses anticipating deterioration than improvement.
The firmly negative SBI reading reflects significant concerns surrounding the UK’s domestic economy, which continues to exhibit weak performance. Other SBI indicators, such as revenue growth, reinforce this sentiment. In Q2, the net balance of businesses reporting an increase in revenue remained firmly negative at -26.8%.
Risks to the outlook remain considerable. Policy changes to the labour market introduced in April have started to weigh on businesses, increasing their operating costs. In the context of persistently subdued demand, these pressures risk further dampening sentiment, prompting firms to delay hiring and investment decisions. Signs of these effects are already emerging in the SBI data.
International headwinds are also mounting. Most notably, tariffs on nearly all UK goods exports to the US continue to exert pressure, with agreed reductions on specific goods, such as steel and aluminium, still not in effect. Taken together, these global and domestic challenges pose a sustained threat to the outlook for small businesses in the months ahead..
Figure 2: The FSB Small Business Index:1 Small business prospects over coming three months Source: FSB - Verve ‘Voice of Small Business’ Panel Survey
1 The Small Business Index is a weighted index of the responses to the question: ‘Considering your overall business performance, and ignoring any normal seasonal variations at this time of the year, how do you view business prospects over the next three months, compared with the previous three months?’ The share of firms reporting are given the following weightings: ‘much improved’ +2; ‘slightly improved’ +1; ‘approximately the same’ 0; ‘slightly worse’ -1; and ‘much worse’ -2; the Small Business Index is derived from the sum of these factors.
Figure 3: Year-on-year change in the FSB Small Business Index
Source: FSB - Verve ‘Voice of Small Business’ Panel Survey
Figure 4: UK SBI against year-on-year UK GDP growth
Source: ONS, FSB - Verve ‘Voice of Small Business’ Panel Survey
Regional Small Business Indices
Negative sentiment persists across all regions
All UK regions recorded a negative reading on the Small Business Index (SBI) in Q2 2025, underscoring widespread pessimism among businesses. A negative score indicates that the proportion of small businesses expecting conditions to worsen outweighed those anticipating improvement over the coming quarter. Amongst the regions, only five saw an improvement in the level of negative sentiment in Q2: the East of England, East Midlands, South West, West Midlands, and Yorkshire and the Humber (though this marginal trend is reversed when that region is grouped with the North East).
The West Midlands recorded the most significant improvement, with its SBI score rising from -45.4 in Q1 to -28.4 in Q2, a notable 17-point improvement. The region, home to key industrial clusters, is pursuing an economic renewal strategy centred on advanced manufacturing,
green energy, electric vehicles, logistics, professional services, and digital innovation. However, it is important to note that this reading is still firmly negative, indicating pessimism on net.
At the other end of the spectrum, Scotland recorded the sharpest deterioration in sentiment in Q2 2025, with its SBI score falling from -15.3 in Q1 to -35.7 in Q2, a 20.4-point decline, after having posted the largest improvement in sentiment in the previous quarter. The weakening in sentiment aligns with recent output figures, as Scotland’s onshore GDP shrank by 0.2% in April, the third consecutive month of contraction.
London experienced the second-largest decline in sentiment, with its SBI score dropping by 18.8 points, from -32.3 in Q1 to -51.1 in Q2.
Figure 5: FSB Small Business Index – Regional variation in small business prospects over the coming three months
Source: FSB - Verve ‘Voice of Small Business’ Panel Survey
Sector Small Business Indices
More than half of the tracked sectors report worsening pessimism
SBI readings remained negative across all sectors in Q2 2025, marking the fifth consecutive quarter of uniformly pessimistic sentiment among small businesses. This trend highlights continuing concerns about near-term business performance.
Of the seven sectors tracked, four reported increased pessimism compared to the previous quarter. Sentiment was most negative in accommodation and food service activities, followed by wholesale and retail trade. The former, in particular, experienced a sharp decline on the quarter, with sentiment dropping by 12.8 points. The continually weak readings across both sectors likely reflect rising operating costs, including increases to the National Living Wage, National Minimum Wage, and employers’ National Insurance contributions introduced in April
2025, which have further squeezed already narrow profit margins. Notably, around a third of all minimum wage jobs in 2024 were concentrated in just two occupational groups: retail and hospitality. Meanwhile, demand-side challenges persist, driven by the ongoing cost-of-living crisis, a deceleration in earnings growth, and weakening consumer purchasing power.
At the other end of the scale, the information and communication sector saw a notable improvement in sentiment, rising from -43.1 in Q1 to -11.0 in Q2, a 32.1-point gain. The industry has been amongst the most significant positive contributors to growth recently. This sector is less exposed to ongoing headwinds, supporting its greater resilience. .
Figure 6: FSB Small Business Index by sector – small business prospects over the coming three months
Source: FSB - Verve ‘Voice of Small Business’ Panel Survey
Accommodation and food service activities
Financial Performance
Revenue expectations dropped for small businesses in Q2 2025, with outlook remaining weak
In the previous SBI survey, the net balance of small businesses expecting revenue growth in Q2 2025 stood at -8.4%. Businesses’ experiences of the quarter were much worse than their prior expectations, with the net balance of small businesses reporting actual revenue growth standing at -26.8%.
The negative balance in Q2 means that more businesses reported declining revenues than recorded gains. The last time a positive balance was recorded was in Q1 2022, underscoring the prolonged challenges facing the UK economy and its small business sector. Notably, Q2’s reading was the second lowest on record, undercut only by Q4 2024.
The reported decline in revenue in Q2 is partly attributable to broader economic conditions. Amid sluggish growth
and heightened geopolitical tensions clouding the global outlook, the financial prospects for small businesses remain poor.
Among the surveyed sectors, construction had the weakest net balance of businesses reporting revenue growth in Q2 2025, standing at -41.6%. This likely reflects the current environment of weak demand and elevated interest rates. The negative sentiment was widespread, with no sector recording a positive net balance.
Looking ahead, more small businesses expect revenue to decrease in Q3 2025 than increase, with a net balance of -14.8% forecasting improvement. Prospects for small businesses are therefore weak, aligning with Cebr’s view of poor growth momentum continuing.
Figure 7: Small business revenue, net percentage balance – Proportion reporting / expecting increase less proportion reporting / expecting decrease
Source: FSB - Verve ‘Voice of Small Business’ Panel Survey
Net balance of businesses reporting an increase in revenue - last three months
Net balance of businesses expecting an increase in revenue - next three months
Exports
Export conditions weaken amid tariff pressures in Q2 2025
In Q2 2025, a net balance of -16.8% of exporting businesses reported an increase in the value of their exports, indicating a broad-based decline in trade activity. This negative sentiment clearly aligns with the implementation of tariffs on UK goods from the US.
The negative sentiment expressed by surveyed businesses is corroborated by official data. In April alone, total goods exports declined by 8.8% in the UK, driven by a 12.6% decrease in shipments to non-EU countries and a 4.3% drop in exports to the EU. Exports to the United States alone declined by £2.0 billion, marking the most significant monthly decline since records began. This sharp drop followed four consecutive months of growth.
When asked specifically about the impact of the new US tariffs, 12.5% of respondents said they expected to incur losses over the next year. Amongst sectors, those in manufacturing anticipate the most widespread losses, being reported by 25.3% of respondents.
Looking ahead to Q3 2025, small businesses continue to anticipate weak export performance, with a net balance of -14.4% of businesses expecting growth in the value of their exports. Ongoing uncertainty around tariffs continues to weigh on exporters and cloud the near-term outlook. However, a recent agreement signed at the G7 summit in June, which includes a partial rollback of tariffs imposed by the US, offers some potential to limit exposure. Until the deal takes effect and trade conditions stabilise, export activity is likely to remain under pressure in the short term.
Figure 8: Changes in value of exports over the previous three months and expectations for the coming three months; net percentage balance (proportion reporting increase, less proportion reporting decrease)
Source: FSB - Verve ‘Voice of Small Business’ Panel Survey
Net balance of exporters reporting growth, past three months Net balance
Costs and Inflation
Share of businesses citing labour and taxation as top cost pressures increased significantly in Q2
The net balance of small businesses reporting an increase in operating costs fell in Q2 to 79.6% from 81.0% in Q1. This nevertheless represents an historically elevated share. These findings underscore the persistent cost pressures weighing on the UK economy.
Labour costs have been a primary driver of rising business expenses for some time. This has been exacerbated recently, with 57.4% of firms citing them as a significant factor in Q2 2025, up from 51.5% in Q1. The rising share of firms citing labour costs will reflect recently implemented employment policies, including the changes to employers’ National Insurance contributions and increases to wage floors, which came into effect from April.
In parallel, taxation was identified as a significant driver of cost changes by 57.5% of businesses this quarter, up 10.3 percentage points from Q1 to be the largest single driver this quarter. This is the first time that taxation has been the largest driver, and is also due to firms’ views on the higher National Insurance contributions, which are an employment tax. Utilities was the third most frequently-cited cost pressure, with 46.8% of respondents highlighting the ongoing strain of elevated energy prices. Lastly, the share of businesses citing fuel as a top cost pressure in Q2 was smaller than the previous quarter, falling from 28.0% to 20.4%. This correlates with the decline in petrol and diesel prices over this period.
Figure 9: Small businesses reporting an increase in overall cost of operation over past three months, compared with the same period a year ago; net percentage balance
Source: FSB - Verve ‘Voice of Small Business’ Panel Survey
Figure 10: Main causes for changing business costs* *Firms may give multiple answers
Source: FSB - Verve ‘Voice of Small Business’ Panel Survey
Employment
Small businesses’ workforce continues to shrink as further job cuts loom
A net balance of -11.7% of small businesses reported growth in employee numbers in Q2. The negative reading means that the number of businesses expanding their workforce was outweighed by the number of businesses reporting a contraction. This marks the thirteenth consecutive quarter of net contraction on this metric.
The latest ONS figures indicate a continued gradual rise in unemployment, with the rate increasing to 4.6% in the three months to April, up from 4.4% in the previous three-month period. Other key labour market indicators have also softened, including a decline in job vacancies and an easing in wage growth. Taken together, these
trends suggest a loosening in labour market conditions, consistent with the cautious sentiment reported by small businesses.
Focusing on forward-looking indicators, small businesses anticipate a further reduction in headcount. A net balance of -10.7% of firms expect to increase their workforce over the next three months. This outlook likely reflects upward pressure on labour costs, driven by the recent changes to employers’ National Insurance contributions, as well as increases in the National Minimum Wage and National Living Wage implemented at the start of the new financial year.
Figure 11: Net percentage balance change in number of people employed – proportion reporting increase, less proportion reporting decrease
Source: FSB - Verve ‘Voice of Small Business’ Panel Survey
Growth Aspirations and Challenges
Small business outlook deteriorates as downsizing plans reach pandemic-era highs
In Q2 2025, the share of small businesses planning to downsize, close, or transfer ownership rose to 26.6%, the highest level recorded since Q1 2020, at the onset of the pandemic.
Conversely, just 24.8% of firms anticipated growth, marking the lowest percentage on record (by a 6 percentage point margin). Collectively, these findings point to a net balance of -1.8% of businesses expecting to grow, the first negative reading on this metric in the history of the Small Business Index.
Assessing the share of firms anticipating growth, the information and communication sector recorded the highest value at 35.0%. This aligns with official data
Figure 12: Growth aspirations for next twelve months
Source: FSB - Verve ‘Voice of Small Business’ Panel Survey
showing that the industry remains one of the most significant contributors to economic growth, driven by continued demand for digital and technology-enabled services.
In contrast, the accommodation and food services sector reported the lowest share of firms anticipating growth at 9.7%. As a labour-intensive industry, its weaker outlook likely reflects rising employment costs. The sector also remains vulnerable to subdued consumer demand. Additionally, increases in input prices over recent months, particularly for food and non-alcoholic beverages, have placed further strain on operating margins.
Small business growth outlook constrained by sluggish economy, subdued demand, and rising input costs
Among small businesses expecting to grow over the next year, the domestic economy remains the most frequentlycited barrier to expansion, with 63.7% of respondents highlighting it as a concern. This is consistent with recent official data, which show the UK economy growing at a sluggish pace at best.
The tax burden emerged as the second most cited constraint, mentioned by 38.6% of respondents. Labour costs followed closely, cited by 37.1%, a notable increase from 33.5% in Q1. This rise likely reflects growing unease around recent government policy measures. The Autumn Budget introduced a series of measures, including higher employers’ National Insurance contributions and increases to the National Living Wage and National Minimum Wage.
* Respondents could select multiple answers
Source: FSB - Verve ‘Voice of Small Business’ Panel Survey
Together, these policies have intensified pressure on small businesses’ labour costs.
Consumer demand also remains a significant constraint on growth. Despite expectations of a modest improvement in economic activity, which may account for the reduction in small businesses citing this factor (from 31.9% in Q1 down to 25.9%), ongoing challenges, including easing earnings growth and the lingering effects of the cost-ofliving crisis, suggest that any improvement in consumer spending is likely to be gradual rather than sharp. As such, it is unsurprising that businesses continue to cite weak domestic demand and broader economic conditions as their primary obstacles to growth.
Figure 13: Potential barriers to achieving growth aspirations*
Credit
Small businesses face tighter credit conditions despite base rate cut
Figure 14: Credit applications and
Source: FSB - Verve ‘Voice of Small Business’ Panel Survey
Have
In Q2 2025, 15.2% of small businesses reported applying for credit, up slightly from 14.6% in Q1. Among those who applied, the share of successful applications rose by 4.8 percentage points to 54.9%, up from 50.1% in the previous quarter.
The proportion of applicants still awaiting a final decision also increased, reaching 9.4%. Meanwhile, the share of
unsuccessful applications dropped by 5.6 percentage points to 35.7% in the second quarter.
Overall, access to credit remains constrained. While more businesses are applying for and securing credit, borrowing costs remain elevated, limiting the overall affordability of finance.
Figure 15: Proportion of small businesses successful in their credit applications in the past three months Source: FSB - Verve ‘Voice of Small Business’ Panel Survey
Credit availability and affordability perceptions still weak despite small uptick this quarter
Despite a 1.6-point increase from the previous quarter, perceptions of credit availability and affordability remain firmly negative, with the credit index3 standing at -30.7 in Q2. This slight improvement may be attributed to higher approval rates.
The share of businesses expressing a positive outlook on credit conditions increased slightly to 12.7%, up 0.5 percentage points from Q1. Within this group, 11.9% rated credit availability and affordability as ‘quite good’, while only 0.8% described conditions as ‘very good’, a
decline on the previous quarter.
Conversely, the proportion of businesses with a negative perception of credit conditions reduced to 51.3%, down from 52.4% in Q1. Notably, the share describing credit conditions as ‘very poor’ declined by 1.9 percentage points, though this was partially offset by a 0.8 percentage point rise in those rating them as ‘quite poor’. Meanwhile, the proportion of businesses adopting a neutral stance increased to 36.0%.
Figure 16: Indices of credit perceptions over time, a weighted net balance of those with negative responses subtracted from those with positive responses4
Source: FSB - Verve ‘Voice of Small Business’ Panel Survey
3 The Credit Index is a weighted index of the responses to the question: “How do you rate the overall availability of new credit for small businesses?”. The different responses are given the following weightings: ‘very good’ +1.0; ‘quite good’ +0.5; ‘neither good nor poor’ 0.0; ‘quite poor’ -0.5; ‘very poor’ -1.0; and the Credit Index is derived from the sum of these weighted shares.
4 Due to methodological changes to the survey, the Credit Availability and Credit Affordability Indices have been superseded by a composite Credit Index, taking into account both of these factors.
Capital investment plans shrink, reflecting uncertain economic outlook
The share of small businesses planning to increase capital investment in the coming quarter fell to 19.8% in Q2 2025, down from 23.6% in Q1. At the same time, the proportion of businesses expecting to reduce their investment rose by 3.4 percentage points to 29.8%. As a result, the net balance of investment intentions deteriorated significantly, from -2.8% in Q1 to -10.0% in Q2.
As discussed throughout the report, the economic outlook remains challenging. Domestic conditions continue to weigh heavily on businesses, marked by sluggish growth, persistent inflationary pressures, and weak consumer demand. Rising input costs, driven by higher labour expenses and a heavy tax burden, are further squeezing profit margins. The fact that capital investment intentions have fallen further into negative territory underscores this broader pessimism.
Among sectors, accommodation and food services recorded the most negative net balance for investment intentions, at -34.2%, likely reflecting weak consumption growth and rising labour costs. In contrast, the professional, scientific, and technical activities sector was the only one to report a positive net balance, at 1.7%.
Given that the services sector is currently the primary driver of UK economic growth, firms operating within it may see increased opportunities for investment. However, this outlook is more favourable for subsectors less exposed to fluctuations in consumer spending and labourintensive cost structures.
Figure 17: % of small businesses expecting to increase and decrease capital investment over next quarter, compared with the previous quarter
Source: FSB – Verve ‘Voice of Small Business’ Panel Survey
Methodology
This report is based on the June 2025 research survey of FSB members carried out by Verve. 1,412 responses were received. The data are weighted by regional gross value added to match the profile of small businesses across the UK. The survey was undertaken between 10-24 June 2025.
Appendix
Summary data table
– coming three months
Credit
and affordability
‘very
availability and affordability – rated ‘poor’ or ‘very poor’
The Small Business Index weights strong responses (much improved or much deteriorated conditions) double and subtracts the weighted proportion of firms reporting deterioration in business prospects over the coming three months from the weighted proportion expecting an improvement.
The Credit Index weights weak responses (quite poor or quite good) half, then subtracts the weighted proportion of firms reporting poor availability of credit from the weighted proportion reporting good availability.
The employment and revenue indicators are net percentage balances, with the proportion of firms reporting a decrease subtracted from the proportion reporting an increase.
All SBI responses are also weighted according to regional gross value added.
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