Manufacturing small business outlook
A snapshot over time from Novuna Business Finance
As a new year gets underway, small businesses in the manufacturing sector have been among the least likely to predict growth during the first three months of 2025. Whilst traditional and seasonal businesses see a quarterly decline on Q4 2024, the driving force of UK small business growth outlook is coming from the professional services sectors.
Top sectors predicting growth in Q1 2025
|
Media & Marketing |
47% |
|
Finance & Accounting |
47% |
|
Legal |
43% |
Bottom regions for predicting growth in Q1 2025
|
Manufacturing |
27% |
|
Construction |
26% |
|
Leisure and Hospitality |
25% |
Relative to the UK average, the strength of small business growth forecasts in the manufacturing sector have fluctuated over time. Significantly, in past years manufacturing growth outlook has peaked during Q1, whereas this year it has fallen during the Q1 period. The contrast between Q1 2025 (27%) and the Q1 position in previous years is stark (44%).
Percentage of manufacturing small businesses that predict growth over time
|
Q1 2023 |
Q2 2023 |
Q3 2023 |
Q4 2023 |
Q1 2024 |
Q2 2024 |
Q3 2024 |
Q4 2024 |
Q1 2025 |
|
|
Manuf. |
44% |
34% |
32% |
24% |
44% |
37% |
35% |
33% |
27% |
|
UK Av. |
33% |
32% |
32% |
32% |
33% |
30% |
35% |
35% |
33% |
This muted confidence is partially explained by 84% of manufacturing enterprises citing barriers to growth: 41% mentioned market uncertainty (which is hard to plan against) and the sector is also most likely to still be feeling the long-term impact of Brexit (42%). Access to skilled labour is also a perceived barrier for 28% of manufacturing businesses.
Business worries keeping business owners awake at night
Since January 2024 there has been a sharp rise in the percentage of manufacturing small business owners that say business worries keep them awake at night – up from 72% in January 2024 to 88% in January 2025.
The top causes of sleepless nights are:
- The possibility of rising tax interest rates – 36%
- How to retain business – 26%
- Stabilising cash flow – 23%
Building tomorrow’s business resilience today
Despite a cautious start to 2025, the Novuna Business Finance research also indicates a determined resilience among UK manufacturers. Nationally, 83% of small business owners said they are working on new initiatives this year that they hope will help them to achieve future growth. This figure is rising for the sector and remains well above the national average (71%). That said, 62% of small business owners said they will have to put these plans on hold if they were unable to secure funding in 2025.
Percentage of manufacturing small businesses
working on plans to achieve future growth
|
Q1 2025 |
83% |
|
Q3 2024 |
81% |
|
Q1 2024 |
75% |
Quick fact file: Manufacturing Vs. the national average
|
% predicting growth in Q1 25 |
% of business owners having sleepless nights |
% working on new initiatives this year |
|
27% Vs 33% |
88% Vs 82% |
83% Vs 71% |
Joanna Morris, Head of Insight at Novuna Business Finance comments on 2025 market overview: “The final months of 2024 were to some extent a tale of two elections – and both had an impact on small business confidence. As the new Labour Government took office in July 2024, our research indicated an immediate election bounce in small business confidence. A few weeks after the General Election, the percentage of small business owners predicting growth hit its highest level for more than two years, after a period of slow decline since the start of 2022.”
“However this uplift was tempered a few months later, when 86% of UK small business owners expressed fears on what they thought could be on the way in the Autumn Budget. Topping the long list of concerns was the prospect of employer’s national insurance hikes (49%), rises to VAT (48%) and income tax (50%). These were issues small business owners believed would damage business growth. Flexible working was a major concern in many traditional sectors, whilst the property sector feared the ripple-effect from the market if there were rises to Capital Gains Tax or Inheritance Tax. The range of fears cited and the depth of concern suggested that the ‘election bounce’ in confidence was fragile and conditional on political and economic certainty, against which small business owners could plan.”
“Beyond the immediacy of the domestic General Election, our Christmas 2024 research indicated that political developments over the Atlantic were also concerning small businesses in the UK. More than seven in 10 small businesses (77%) said they are fearful that policies from the new US administration could have a ripple effect on the outlook for UK small businesses. The most significant concerns included the possibility of tariffs on UK exports to the USA (43%) and fresh uncertainty around the UK’s trading position in the world – with 30% fearing a weakening of the UK’s special relationship with the US and 29% concerned about the UK now finding itself isolated – outside the EU and no longer as close to the USA. Further, the possibility of increased market volatility impacting the UK was also a major concern and on two counts: 33% were concerned about the impact on UK economic growth forecasts and interest rates, whilst 22% feared the impact on their own trading relationships.”
“All this is context, but our research of UK small business owners spanning 11 years tells us that their growth forecasts are, so often, heavily rooted in the prevailing economic context – and how this shapes confidence, stability and a sense of certainty.”
“It is therefore perhaps unsurprising that, as 2025 started, the percentage of UK small business owners predicting growth had dipped to a nine-month low. Whilst the percentage of small businesses predicting growth for the three months to 31 March had fallen back to 33% – the Q1 2025 data also indicates a four-year high in the percentage of small business saying they will scale down or contract during the period (13%). In addition, the percentage of enterprises that fear closure has hit a two-year peak (8%). For those forecasting contraction, Q1 2025 is the first time in five quarters that the figure has exceeded single digits.”
“These findings are all from The Business Barometer study, which has tracked small business growth outlook every quarter since 2015. The latest data suggests a mood of caution offset by a deep resilience. Ever since Brexit and Covid, small businesses have responded to short-term challenges with resilience and by investing in new initiatives to power future growth. And already, we are seeing this for 2025.”
“At Novuna Business Finance, we are committed to supporting established small businesses across a range of sectors with flexible funding solutions. To help small businesses fulfil their true potential we also need to stop and listen. The Business Barometer study has proven to be a helpful resource to give us a glimpse into the minds of small business owners – how they plan, how they grow and how they react to the world events and issues that shape their market, present challenges and allow for opportunities.”