UK businesses remain broadly confident in Britain as a base for growth, even as rising costs and economic uncertainty weigh on margins, according to new research from Barclays.
The bank’s latest Business Prosperity Index, analysing anonymised data from around one million clients alongside a survey of 1,000 business leaders, reveals a two-speed economy emerging at the end of 2025. Larger firms are pushing ahead with long-term borrowing and investment, while smaller companies are turning to short-term liquidity to manage tighter margins.
Despite ongoing challenges, 58 per cent of business leaders said the UK remains the best place to start, scale and grow a business. A similar proportion, 57 per cent, believe Britain is becoming a more attractive place to list, with London cited as the preferred market for a future float by 46 per cent of respondents.
Almost all firms surveyed (93 per cent) reported higher trading costs over the past year, driven primarily by energy (85 per cent), labour (80 per cent) and supply chain expenses (78 per cent).
In response, 80 per cent have passed some of these increases on to customers, with businesses transferring an average of 30 per cent of higher costs. A further 65 per cent expect to raise prices again this year.
Energy pressures remain particularly acute, with 34 per cent of companies reducing consumption to offset rising bills. More than a third (37 per cent) view cutting operating costs as the most effective way to unlock investment in 2026.
Barclays’ client data show cash inflows slipped 3.4 per cent year-on-year in the fourth quarter, signalling subdued spending. However, borrowing patterns differ sharply by company size.
Larger firms increased long-term borrowing by 8.7 per cent compared with a year earlier, suggesting confidence in future expansion. By contrast, smaller businesses reduced longer-term lending while increasing overdraft usage by 2.5 per cent, reflecting short-term cash flow pressures.
Two-thirds of large businesses and over half of medium-sized firms believe current economic conditions support long-term growth, compared with just 12 per cent of micro businesses.
Confidence in individual company prospects remains comparatively strong, with 86 per cent of small business leaders upbeat about the year ahead, although that figure drops to 68 per cent among micro firms.
Against this backdrop, Barclays has launched its 2026 Business Prosperity Fund, committing £22bn in lending to support new investment and refinancing among business and corporate clients.
Abdul Qureshi, managing director of Barclays Business Banking, said smaller firms were understandably cautious but still saw opportunity. “There is clearly more to be done to help turn confidence into tangible progress,” he said.
Matt Hammerstein, chief executive of Barclays UK Corporate Bank, added: “Even in a period marked by cost pressure, businesses show clear belief in the UK as a place to grow. Our role is to help bridge the gap between ambition and action.”
The findings suggest that while the macroeconomic backdrop remains uncertain, corporate sentiment towards the UK’s long-term prospects is holding firm — with access to capital, market reputation and investor depth cited as key advantages.
For policymakers and lenders alike, the challenge now is ensuring that resilience among larger firms translates into renewed momentum for smaller enterprises, where caution is still tempering expansion plans.
