Welsh small businesses growth outlook falls to lower level than the covid lockdown era

The percentage of Welsh small businesses predicting growth has hit a record low of 13% – trailing all other UK regions and the national average of 29%. The current figure for Wales is also lower than the levels of growth outlook registered in Wales through the Covid lockdowns of 2021, according to new research from Novuna Business Finance.

The current position stands in stark contrast to the second half of 2024, when the ‘election bounce’ of a new government saw an immediate upturn in Welsh small business confidence, peaking at 32%. Two budgets later and with tariff chaos gripping the economy – small business forecasts have fallen to a new low in Wales.

Percentage of small businesses predicting growth each quarter – results over time

The research findings are the latest from Novuna Business Finance’s Business Barometer study, which has tracked the percentage small business owners that predict growth every quarter for the last 11 years.

With UK small business confidence falling for a second successive quarter, Novuna’s new data also shows that current economic volatility is a cause of serious concern to 68% of Welsh small businesses. Whilst only a few Welsh businesses (8%) have processed the possible  impact of US tariffs, 43% believe the current economic instability will play out in UK tax rises later this year. A further 40% fear current geo-political events will trigger a fall in Welsh consumer spending this summer. All these factors are contributing to the significant fall in small business growth forecasts for the three months to 30 June.

The UK picture as manufacturing confidence plummets

The consequence of market uncertainty has led to falls in small business growth outlook across many key UK industry sectors, including manufacturing, construction, retail, media, education, legal, finance and medical services. Growth outlook in the manufacturing sector has fallen to the lowest since the UK went into the first Covid lockdown and – if one rules this out as an exceptional period – this quarter is the first time in 11-years when the percentage of manufacturing small businesses predicting growth has fallen below 20%. In addition to this, growth outlook in retail has hit a three-year low and in construction a 12-month low.

Sectors reporting the biggest quarter-on-quarter falls in growth outlook

Regionally, small business growth forecasts in London recovered after a significant fall in Q1 2025. The North East, East and South West were the only other UK regions where growth outlook increased on last quarter – with sharp falls for Q2 recorded in the North West, Yorkshire, West Midlands, South East, Wales and Scotland.

Percentage of small businesses predicting growth each quarter by region

Jo Morris Head of Insight at Novuna Business Finance comments: “Events of recent weeks have delivered seismic shockwaves and – the one thing small businesses really dislike – uncertainty. After the promise of recovery last summer in Wales, there has since been a slide in small business confidence and this plays out with this quarter seeing small business growth forecasts at their lowest level for many years. The Government is committed to a growth agenda for the UK economy – as we all are – but  that simply will not happen without Welsh small businesses feeling they can drive forward their growth plans. There are 5.5 million SMEs in the UK and when their growth predictions fall, we all need to sit up and listen.”