The survey, completed by 245 businesses, found that 54% of respondents anticipate trading conditions will worsen in 2026/27 compared to 2025/26, while just 20% expect an improvement.

Confidence remains mixed overall, with 40% who are pessimistic about the economic outlook for their business in the new tax year, compared with 34% who feel optimistic.

Cost pressures are a recurring theme. Seven in ten businesses cited increases in tax and operating costs as one of the key challenges they currently face. Against that backdrop, 70% expect to increase prices over the next three months — suggesting many are looking to protect margins wherever the market allows. 

Employment costs remain a particular concern. 61% of respondents expect increases in National Minimum Wage/salary costs to impact their business negatively, reinforcing why many firms are choosing stability over expansion in their recruitment plans. While 72% plan to maintain workforce levels this tax year, 13% expect to reduce headcount.

External uncertainty is also influencing sentiment. Almost four in five businesses (79%) said they are concerned about the impact conflict in the Middle East may have on their business — a reminder that energy prices, supply chains and consumer confidence can still shift quickly, often beyond the control of individual firms.

Looking longer-term, most respondents said the new caps on Business Property Relief (BPR) and Agricultural Property Relief (APR) have either no impact (40%) or are “business as usual” (33%). However, 27% reported they are adjusting their long-term strategy – through restructuring ownership, reducing capital investment or exploring a sale – underlining the importance of proactive planning and advice.

Armstrong Watson’s January 2025 Business Confidence Survey, conducted following the 2024 Autumn Budget, showed a sharp deterioration in sentiment, with almost two‑thirds of businesses pessimistic about the outlook and only a small minority expecting trading conditions to improve.

While the March 2026 survey suggests that the depth of pessimism seen last year has eased, expectations for trading conditions remain subdued, and cost pressures continue to weigh heavily on decision‑making. Businesses appear to be focusing on resilience —maintaining workforce levels where possible, reviewing pricing carefully and seeking greater clarity around cashflow and tax.

Paul Dickson, CEO of Armstrong Watson, said: “Businesses are showing resilience, but many are clearly operating in a ‘higher cost, higher uncertainty’ environment. Where firms can forecast earlier, plan tax proactively and keep a close eye on cashflow, they put themselves in the best position to protect profitability and invest with confidence.”

The survey also highlights where businesses want support most in 2026. Tax planning (49%) and financial advice (36%) top the list, followed by funding support (19%), digital transformation (16%) and market analysis (15%).