Confidence among UK business owners edged up in December, but for sole traders and microbusinesses, the reality on the ground remains one of caution, stalled hiring and postponed spending.
New figures from the Institute of Directors show its Economic Confidence Index rose to -66 in December, from -73 in November, suggesting the immediate shock of the Budget has faded.
But confidence in respondents’ own businesses barely moved, staying at -4, highlighting how limited that optimism feels for people actually running businesses day to day.
For the smallest businesses, the forward-looking signals are telling:
• Headcount plans worsened, with fewer firms expecting to take on staff
• Investment intentions fell again, as owners conserve cash
• Costs remain stubbornly high, despite a slight easing
• Revenue expectations are flat, not growing
This aligns closely with what Not.Ltd founders have been saying for months, that uncertainty around tax, employment rules and running costs makes expansion feel like a risk, not an opportunity.
Anna Leach, the IoD’s Chief Economist, said December’s improvement needs to be seen in context.
“Yes, confidence lifted slightly — but it’s still close to the lows seen during Covid,” she said. “Hiring freezes remain widespread, and investment is being postponed or cancelled as companies protect cash.”
She added that while reduced policy volatility could help in 2026, it won’t fix the fundamentals facing smaller firms.
What would actually help small businesses in 2026?
When business owners were asked what would make the biggest difference next year, their answers were clear:
• Lower business taxes
• Fewer changes to employment law
• Simpler regulations
• Lower energy costs
• Less complex tax rules
For sole traders and microbusinesses, the message is blunt: confidence isn’t rebuilt by optimism alone. It comes from stability, predictable costs and fewer policy shocks.
