Entrepreneurs across the UK are increasingly concerned that the country’s weak growth outlook signals stagnation rather than recovery, with many already reassessing hiring, investment and exit strategies as economic uncertainty persists.

Business owners view the current 0.9% growth forecast as the economy merely “treading water”, according to leading audit, tax and business advisory firm Blick Rothenberg. The figure, recently revised by the Bank of England, represents a downgrade from the central bank’s earlier estimate of 1.2% growth for 2026 and sits well below the 1.4% projection made by the Office for Budget Responsibility in its November outlook.

Malli Kini, a partner at the firm, said the subdued outlook is already influencing real-world business decisions.

“I work with entrepreneurs every day. To them, a 0.9% growth forecast does not feel like momentum, it feels like treading water,” he said. “The people I advise are not waiting for a recession to worry about. They are already making difficult decisions about whether to hire, whether to invest and whether this is the right time to exit.”

He added that in a period of marginal growth, business confidence becomes the key economic driver, and at present, it remains fragile.

Recent economic data highlights the subdued pace of the UK recovery. According to figures from the Office for National Statistics, the economy expanded by just 0.1% in the final quarter of 2025, slightly below expectations and reinforcing concerns about the country’s growth trajectory.

While inflation has cooled significantly from its peak of 11.1% in October 2022, it still remains above the central bank’s target. Consumer price inflation fell to 3% in January 2026, the lowest reading since March 2025, and the Bank of England expects it to return to its 2% target over the coming months.

The central bank, which currently holds interest rates at 3.75%, has suggested that easing inflation and falling energy costs could help stabilise household finances.

However, Kini said the experience on the ground for businesses does not reflect the more positive macroeconomic narrative.

“My clients aren’t experiencing lower inflation in any dramatic way in their profit and loss statements,” he said. “What they are experiencing is the increase in employer National Insurance contributions announced in October. For a business with around 20 staff on average wages, that can represent an additional £30,000 to £50,000 a year in costs.”

“That’s not an abstract policy change. It directly affects decisions about whether a company can afford to take on its next hire.”

Global uncertainty is also complicating the economic outlook. Kini pointed to the recent spike in global oil prices following military strikes involving Iran as a potential new inflationary pressure that was not incorporated into official forecasts.

“The inflation complication is Iran,” he said. “The spike in global oil prices following this week’s strikes was not factored into the OBR’s forecasts, which were finalised just days beforehand.”

If sustained, higher energy costs could filter through the economy via transport, food and supply chain costs, potentially delaying further interest rate cuts and undermining the central bank’s efforts to stabilise inflation.

“This could feed back into the cost base for businesses just as policymakers were hoping the inflation story was beginning to normalise,” Kini warned.

At the same time, signs of weakening labour demand are emerging across the economy. The unemployment rate rose to 5.2% in the three months to December 2025, the highest level in almost five years.

Although wage growth remains ahead of inflation, providing some relief for households, the labour market is expected to soften further through 2026.

Kini believes the figures mask a broader shift in employer behaviour.

“A 5.2% unemployment rate will be presented as a structural adjustment,” he said. “But in practice I’m seeing something different. Employers who would normally be expanding their teams are choosing not to hire because the combined cost of employment has risen.”

He cited a combination of factors influencing business caution, including the increase in employer National Insurance contributions, changes to employment legislation and broader regulatory compliance costs.

“For many employers, caution has become the rational response.”

Another closely watched figure among entrepreneurs is the government’s fiscal “headroom” — the buffer between public spending plans and the point at which the Chancellor would breach self-imposed borrowing limits.

At the Autumn Budget, Chancellor Rachel Reeves was estimated by the OBR to have £21.7 billion of fiscal headroom. That margin was widely viewed as relatively thin by historical standards.

While recent data has provided some reassurance, including a record £30.4 billion budget surplus in January driven by strong tax receipts, analysts believe the margin remains sensitive to weaker growth forecasts or unexpected spending pressures.

Kini said many business owners are watching the fiscal headroom closely because it signals whether further tax increases might be introduced later this year.

“If that headroom holds, the Chancellor has room to breathe,” he said. “But if growth disappoints, which is a real possibility given global events, the buffer shrinks.”

“If it shrinks, the pressure to raise additional revenue in the Autumn Budget increases.”

Entrepreneurs prepare for potential tax changes

Business owners are already factoring potential tax changes into their planning, particularly around capital gains and exit strategies.

Kini suggested that investors should pay particular attention to policies such as Business Asset Disposal Relief and capital gains tax rates, both of which were adjusted in 2024 and may be subject to further reform.

“From the Treasury’s perspective, there is still room to go further,” he said.

His advice to entrepreneurs is to treat the relatively quiet Spring Statement as an opportunity to prepare rather than relax.

“Don’t let a low-key Spring Statement make you complacent,” he said. “The changes already in law around National Insurance, capital gains tax and employment rights are significant.”

“Entrepreneurs should use the coming months to review their corporate structure, think about succession or exit timelines, and ensure their investment plans remain tax-efficient under the current rules, not the rules they remember from three years ago.”

Kini concluded that the businesses most likely to succeed through the current period of economic uncertainty will be those that take a proactive approach to planning.

“The entrepreneurs who come through this period well won’t be the ones who waited,” he said. “They will be the ones who planned ahead.”