Business confidence in the UK has fallen to its lowest level in three years, according to the British Chambers of Commerce (BCC), with fewer than half of firms expecting increased turnover in the year ahead.
The BCC’s latest quarterly economic survey, based on responses from over 4,600, mostly small and medium-sized businesses, showed that 46% anticipate higher turnover in the next 12 months, down from 48% in the third quarter of last year, 49% in the second and 58% before the 2024 Budget.
Nearly a quarter (24%) of businesses expected a decline in turnover over the coming 12 months.
Tax remains the leading concern, cited by 63% of firms, although anxiety eased slightly after the Budget.
Inflation is still a major issue for 56% of businesses, while 52% now expect to raise prices in early 2026, up from 44% in the previous quarter. Labour costs remain the top driver of price pressure, following policy changes in recent Budgets.
Only 19% of firms said they had increased investment in their business, while 27% scaled back plans, marking the fifth consecutive quarter of weak investment. Hospitality and retail were particularly hard-hit, with over a third of businesses in each sector cutting back.
David Bharier, head of research at the BCC, said: "The outlook for SMEs in 2026 is unsettled."
He acknowledged that, after a period of uncertainty and speculation heading into the Budget, concerns about major new tax rises "eased somewhat in the aftermath" though he felt the Budget "did little to boost business confidence".
The BCC said the government "needs to turn last year’s strategies into action; boost investment, significantly expand trade, and ease the myriad burdens facing businesses".