The ACCA and IMA Global Economic Conditions Survey (GECS) showed confidence amongst British SMEs has increased for the second consecutive quarter, although the improvement in Q2 was modest compared to the previous quarter.
Confidence remains notably below its long-term average.
After significant challenges in Q4 2024 and Q1 2025, there are some possible signs of optimism. While the capital expenditure index remains significantly below its average, it improved its result this quarter and is markedly improved from its position in Q2 last year.
The New Orders index improved for the third consecutive quarter, which combined with improvements in the employment and staff investment indices suggests the post-Budget shock has somewhat abated and firms are starting to plan for growth.
These results show considerable noise in the marketplace and businesses will be looking for certainty in order to plan for growth. The index tracking access to finance has shown much volatility in the recent past, with a sharp fall this quarter. Businesses are also reporting a second quarter increase in problems securing prompt payment.
The publication of the UK Government’s Spending Review, Industrial and Trade Strategies came after this data was collected, so the Government will likely hope that this will provide some further improvement later in the year, ACCA said. However, with inflation again increasing, it’s clear that businesses remain in a cautious mood, it added.
Glenn Collins, head of technical and strategic engagement, ACCA UK, said:
“The UK economic and global outlooks remain challenging for business. The publication of the industrial strategy, trade strategy and upcoming small business strategy are important steps, but business needs to see steps from the Government that it is focused on providing certainty. The upcoming Budget will need to deliver clear and long-term actions that will support the rebuild of business confidence and a focus on growth.”
Globally, for the first time, geopolitics topped accountants' risk priorities in Q2. Economic fears tied with regulatory and compliance risks as the second highest risk priority, while talent scarcity and cybersecurity remained critical but were slightly less prominent this quarter.
Climate change, fraud, and supply chain risks remained lower down the agenda for global respondents, suggesting a renewed focus on macro-external volatility, with boards and executives reacting to intensifying global conflicts, regulatory unpredictability and economic pressure.
Jonathan Ashworth, chief economist, ACCA, said:
“After rising strongly in Q1 2025, confidence among UK small and medium-sized enterprises (SMEs) only registered a modest improvement in the Q2 2025, and remains depressed by historical standards.
“There were quite large gains in the Capital Expenditure and Employment indices, but both remain at low levels historically, consistent with ongoing caution among firms. There was a very minor gain in the New Orders Index, and it is not very far below its historical average.
“Meanwhile, it was encouraging to see that cost pressures for firms look to be becoming a little less severe. Our indicators of corporate stress appear to be broadly within the range of values they have recorded in the last few years.
“All in all, while some encouragement should be taken from the improvement in our key indicators this year, they still remain indicative of a very challenging backdrop for the UK economy, and developments with the global economy pose downside risks in the second half of the year.”
