The UK Growth Paradox

Ask a UK business leader if they expect to grow this year, and the answer is almost always yes. Ask how they feel about the economy, and the answer changes completely.

Ask a UK business leader whether they expect their company to grow this year, and the answer is almost always yes. Ask the same person how they feel about the UK economy, and the answer is very different.

That gap is one of the more revealing facts about British business right now. Recent research from iwoca’s annual SME Outlook found that a large majority of small business leaders expect their turnover to grow this year, a figure that has barely moved from the year before. Aviva’s research tells a similar story, with nearly three-quarters of SMEs expecting growth and only a small minority expecting to shrink. Individual ambition, in other words, remains largely intact.

Source: iwoca SME Outlook.

Confidence in the wider economy is a different matter entirely. Nearly two-thirds of leaders said they believed the country was falling behind other economies. This is not a business population that has lost belief in itself. It is one that has lost belief in the conditions around it.

Economists broadly agree that 2026 UK GDP growth will land somewhere close to 1.4%, a figure echoed across forecasts from the Bank of England’s rate outlook to post-Budget commentary from major lenders. That is modest growth by any historical standard, and it sits awkwardly next to the fact that most individual businesses still expect to outperform it substantially.

Both things are probably true at once. The economy as a whole is growing slowly. Many individual companies are still growing faster than that. But “faster than 1.4%” is a low bar, and a business genuinely aiming for ambitious, compounding growth needs a very different frame of reference than the national average.

The actual numbers back this up. UK SME capital expenditure fell 17.4% year-on-year in the year to Q4 2025, even as revenue and profits both grew over the same period.

Source: Sage SME Pulse.

Average business turnover across the UK grew just 1.3% in 2025. For most businesses, growth isn’t the story. Standing still, or losing ground, is.

The confidence gap isn’t abstract. It’s rooted in specific, quantifiable cost pressures that have landed on UK businesses over a short period.

None of this is unique to any one sector. It’s a shared backdrop that every ambitious company is now planning growth against, whether they’re a ten-person consultancy or a two-hundred-person manufacturer.

It would be easy to read all of this as simply “a hard year.” But the more interesting story is what happens to companies that don’t adjust for it. A business that plans its growth targets as if the operating environment were the same as three years ago is planning against a fiction. The businesses that will actually hit ambitious numbers this year are the ones treating the current environment as the baseline, not as a temporary inconvenience to be waited out.