Confidence among UK SMEs has fallen to a record low as businesses continue to grapple with rising costs, higher employment taxes and ongoing global uncertainty.
The latest ACCA and IMA Global Economic Conditions Survey (GECS) shows UK SME confidence declined further in Q2 2026, while confidence improved slightly globally.
The survey suggests UK businesses remain under intense pressure. More than eight in ten respondents (80%) reported rising operating costs during the quarter. Weak employment and capital expenditure indices also indicate that businesses remain reluctant to recruit or invest as they navigate an increasingly uncertain economic environment.
Meanwhile, concerns over late payment continue to rise, adding further pressure to businesses already operating in a challenging environment. The government has initiated new legislation to address the ongoing concerns on the impact of late payment; these figures renew the calls for these changes to be implemented as quickly as possible.
The uncertain global backdrop, including the continued impact of conflict in the Middle East on energy prices and supply chains, has added to pressures facing UK businesses. However, domestic factors also continue to weigh heavily on sentiment, with respondents citing higher employer taxes and increases to the National Living Wage as significant challenges.
In contrast, the global survey found confidence improving modestly despite record operating cost pressures, reflecting the resilience of the wider global economy and easing fears of a prolonged escalation in the Middle East conflict.
UK SMEs, however, have yet to experience a similar recovery, with cost pressures continuing to weigh heavily on businesses as confidence has remained well below its historical average since late 2024.
Lloyd Powell, head of ACCA Cymru/Wales, said:
“Our indices show business confidence and appetite for investment are low. This is putting a dampener on UK growth. For the UK's trajectory of low or no growth to change, businesses need a more certain environment.
“Rebuilding confidence must therefore be an immediate priority. The upcoming budget and other announcements are an opportunity to provide business with the certainty it needs.”
Jonathan Ashworth, Chief Economist, ACCA, said:
“Sharply rising costs were unsurprisingly a major issue for firms in Q2. If they increasingly try to pass these on to the consumer, this would significantly raise the risk of policy tightening by the world's major central banks. That said, policymakers will be hoping for favourable developments on the diplomatic front, and a return of oil prices to around pre-crisis levels, potentially allowing them to sit on their hands for the rest of 2026.”
Ashworth concluded:
“Despite some improvement in confidence, accountants globally remain very cautious, likely in part reflecting the uncertain and unpredictable operating environment which has become the ‘new normal' in recent years.”
The survey was conducted between 3 and 17 June.
