The latest Global Economic Conditions Survey (GECS) from the ACCA and IMA reveals a sector besieged by weak growth and escalating costs, struggling to recover from the significant downturn observed earlier in the year.

The capital expenditure and employment indices also speak to heightened caution among smaller businesses. Only a very small share of respondents reported that their businesses or clients increased investment in capital projects in response to changes to the economic environment over the past three months, but the proportion scaling back investment was elevated. Similarly, a significant proportion of respondents reported job cuts or a hiring freeze, with the share creating jobs or resuming hiring very low.

However, the forward-looking New Orders Index improved in Q4 – while it is at a low level by historical standards, it is significantly higher than its trough during the pandemic. This may indicate that the underlying economic situation is not quite as bad as some of the other measures suggest and that there are signs that some in the sector are looking for opportunities and preparing for growth.

Susan Love, strategic engagement lead for Scotland, ACCA, said: “Business confidence is fragile, from a dramatic fall in confidence following the 2024 Budget, little improvement has been made, and while the fall after the 2025 Budget was modest, the impact on SMEs and the economy is quite stark. 

“Having said that the small improvement in the New Orders Index could indicate that many businesses may be thinking about investing as they see opportunity on the horizon.”

Cost pressures remain intense – with over 80% of respondents reporting increased operating costs in Q4. Meanwhile, looking at GECS’ early indicators of corporate stress, problems securing prompt payment, concerns about customers going out of business, and concerns about suppliers going out of business, all remained elevated by historical standards.

Jonathan Ashworth, chief economist, ACCA, said: “All in all, the Q4 2025 GECS indicators continue to point to a very downbeat business climate for UK SMEs, with confidence struggling to recover from its historic low at the end of 2024. 2026 looks set to be another challenging year, amid sluggish UK economic growth and massive global uncertainty.”

Additional interest rate cuts should provide some relief to businesses, although elevated domestic cost pressures suggest that the Bank of England will need to move quite cautiously with any monetary easing.

See the UK infographic. Read the report here.