A growing proportion of small businesses in Wales expect to expand during the final three months of 2026, with new research showing an improvement in business optimism despite continuing economic uncertainty and concerns over rising costs.
Figures from Novuna Business Finance reveal that 26% of Welsh small businesses are forecasting growth between October and December, up from 20% during the summer and ahead of the 23% recorded at the same point last year.
The findings suggest that growth expectations among Welsh businesses are strengthening as the year draws to a close, although the outlook remains mixed across different sectors.
The improvement comes ahead of the important Christmas trading period, with retailers reporting a more positive outlook than in the previous quarter.
In the retail sector, 27% of small businesses now expect growth, compared with 21% in the previous quarter. However, this remains below the 32% recorded at the beginning of the year, reflecting the continued uncertainty facing a sector that has experienced significant fluctuations in confidence since the Covid lockdowns and subsequent cost-of-living crisis.
The research also identifies encouraging annual improvements in growth expectations across several industries, including transport and distribution, IT and telecommunications, education, and leisure and hospitality.
Transport and distribution businesses have reported an increase in growth forecasts compared with the start of the year, although rising operating costs remain a significant concern.
Across the UK, the average price of diesel has risen above £2 a litre for the first time, adding further pressure to businesses reliant on vehicles and distribution networks.
The research found that 62% of small businesses believe further tax increases affecting petrol or diesel vehicles would negatively impact their growth plans.
Elsewhere, growth expectations in manufacturing and construction have remained broadly unchanged over the year, while agriculture, property, medical and legal services have experienced declines.
Despite the overall improvement in growth forecasts, the findings highlight continuing concerns about the economic environment and the potential impact of further business taxation.
With the Budget approaching later this month, 55% of Welsh small businesses surveyed said additional increases in National Insurance would negatively affect their finances and growth prospects.
A further 40% expressed concern about the potential impact of increases in Corporation Tax.
These concerns come against a backdrop of wider economic volatility, including uncertainty over government borrowing, inflation and interest rates.
Nevertheless, the increase in the proportion of Welsh small businesses anticipating growth provides a more encouraging picture heading into the final months of the year.
With growth expectations improving since the summer and exceeding levels recorded a year ago, the latest Novuna Business Finance findings suggest that more Welsh firms are approaching the end of 2026 with plans for expansion, even as they navigate continued pressures on costs and profitability.
Percentage of small businesses predicting growth by industry sector:
Jo Morris, Head of Insight at Novuna Business Finance comments:
“Our quarterly research this year shows that many small businesses across Wales are working hard to absorb the pressures of rising fuel and energy costs. Many are also concerned about how further tax, inflation and interest rate changes could impact their growth plans. At the same time, the majority of smaller businesses have not yet fully worked through whether and how AI could practically help business growth.
“Despite all the headwinds, what we have seen since the Covid era and the cost-of-living crisis is that small business owners are resilient. They dislike uncertainty, but they find ways to adapt, innovate and pursue growth. Looking ahead to 2027, the UK’s growth ambitions depend heavily on their success. The autumn and winter months are an important time to step up and support UK small businesses. At Novuna Business Finance, we continue to support established businesses by helping them invest in essential assets, preserve cash flow and ease pressure on other areas of their budget.”
