A third of slight businesses in the United Kingdom are planning to close or reduce output, according to warnings issued Thursday by the Federation of Small Businesses (FSB). The impending closures are linked to a combination of rising costs, including energy bills, increased employment costs and changes to statutory sick pay, set to take effect in April.
The FSB has written to Shadow Chancellor Rachel Reeves outlining the concerns, stating that the cumulative impact of these financial pressures risks pushing firms over the edge. Research from the British Retail Consortium (BRC) further underscored the anxieties, finding that 61% of retail finance chiefs are planning to reduce staff hours and overtime, while 45% anticipate a freeze on recruitment.
Mounting anxiety among small and medium-sized enterprises (SMEs) has also been reported by finance brokers. According to Iwoca’s latest SME expert index, 58% of brokers cite increased running costs as the biggest concern for small business owners – a rise from 48% in the third quarter of 2025 and the highest level recorded since the survey began in 2022. The upcoming minimum wage increase was identified as the most negative impact by 33% of brokers, followed by increases to dividend tax rates and business rates reform.
Demand for financial support is increasing, with 74% of brokers expecting SME borrowing to increase over the next six months, up from 66% in the previous quarter. Iwoca’s SME lending thermometer rose to 5.98 in the fourth quarter of 2025, on a scale of one to ten.
“Small businesses are clearly feeling the pressure of rising costs, and the further Government-mandated cost increases in April will add to that burden,” said Giovanni Contratti, director of the broker channel at Iwoca. “Demand for finance is growing as businesses look to invest and continue growing.”
A recent report by the House of Commons Business and Trade Committee concluded that small firms are facing cumulative pressures comparable to those experienced during the pandemic. The committee found that SMEs were owed £112 billion in unpaid invoices at the end of 2024, leading to an estimated 38 small supplier closures each day due to late payment practices.
Average electricity prices in 2024 remained nearly double their level three years earlier, while retail crime is estimated to cost businesses £4.2 billion annually. Innovation and export activity among SMEs have also fallen to a four-year low, according to the latest State of Small Business Britain report from the Enterprise Research Centre.
Despite a record high of 36% of working-age adults planning to start a business, the proportion of SMEs reporting product innovation has dropped from 30.4% in 2021 to 24.1% in 2024. “The UK has a remarkably resilient and creative entrepreneurial culture. We are seeing a worrying decline in innovation and exporting,” said Stephen Roper, director of the Enterprise Research Centre.
On Thursday, February 19, 2026, President Donald Trump announced a $10 billion contribution to his Board of Peace, a move that circumvents congressional appropriation and authorization, according to posts on X, formerly known as Twitter. The announcement was made during an event attended by JD Vance and Marco Rubio.