Cost hikes denting small business confidence

16 Jan 2026

Small businesses are facing a tough start to 2026 as confidence slumps in the face of cost hikes, research by the Federation of Small Businesses (FSB) has shown.

The FSB's Small Business Index (SBI) plunged to -71 in the final quarter of 2025, meaning far more businesses were struggling than succeeding.

The hospitality, accommodation and food sector is the worst hit, recording a confidence score of -104. A record 64% of firms say taxation is their biggest cost pressure, higher than labour or energy.

To mitigate these issues, FSB is calling for a 20p reduction to the Retail, Hospitality and Leisure (RHL) multiplier to business rates.

It is also asking the government to act on rising energy bills; introduce a Statutory Sick Pay (SSP) small business rebate; and raise the Employment Allowance in line with the National Living Wage (NLW).

Tina McKenzie, Policy Chair of the FSB, said: 'There are clear steps that would help alleviate some of these issues – an urgent rethink on business rates, addressing the soaring standing charges for energy, raising the Employment Allowance and introducing an SSP rebate. We need to see urgent action on these in the Spring Forecast and the upcoming King's Speech. 

'Small businesses always show remarkable resilience in times like these, adapting time and time again in the face of sustained pressure, but resilience alone cannot offset policies that keep pushing costs higher.'