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As we move into 2026, small businesses across the UK are facing an economic landscape marked by slow growth, shifting regulations, and continuing uncertainty.
But there’s also pockets of real opportunity. Simon Pinion, Business Advisory Partner takes a look at what the latest data suggests the year may hold.
Technology: AI continues to dominate
AI remains the headline story in tech, but I think we can expect to see the market reshuffling.
Whilst many analysts have warned that parts of the sector are showing signs of “froth” – with valuations stretched and volatility rising – investors poured record sums into AI firms in 2025.
So, 2026 may bring a correction in specific segments – not unlike the early 2000s dot‑com cycle.
- Analysts expect the AI market to “splinter” as investors differentiate between profitable AI infrastructure firms and less‑proven AI spenders. [cnbc.com]
- Some economists warn that an AI market correction is possible if growth expectations outpace commercial results, though long‑term fundamentals remain strong. [fool.com]
- And if investors in US AI stocks move away from these stocks it could be good news for FTSE who may see increased investment.
For small businesses, this could mean more accessible AI tools as competition grows – and potentially more favourable pricing if big tech valuations cool.
UK economic outlook
Weak but steady growth is expected. With multiple independent forecasts showing UK GDP growth of around 1.0–1.2% for 2026, indicating another year of subdued expansion:
- PwC projects 1.2% GDP growth for 2026. [pwc.co.uk]
- CBI forecasts growth of 1.0% for 2026. [cbi.org.uk]
- Other analysts echo concerns about weak consumer spending, low private‑sector investment, and continued pressure on margins.
For the retail and hospitality sectors consumer confidence remains fragile, with many households intending to maintain higher savings rather than spend.
And with higher labour costs, business rates reform, and new employment law obligations, the hospitality sector is set for a challenging year.
Small businesses in these sectors will need to prepare for tighter margins and potentially reduced footfall, but without new Government support many may face an uncertain future.
Inflation & interest rates
There is relief coming, but slowly. The broad consensus is that inflation will continue falling:
- The OBR forecasts inflation at around 2.1% by Q4 2026. [commonslib…liament.uk]
- PwC expects 1.9% inflation in 2026, approaching the Bank of England’s target. [pwc.co.uk]
And interest rates will follow:
- Bank Rate is projected to edge down to around 3.5% in 2026. [pwc.co.uk]
- A gradual reduction is expected to offer homeowners and businesses modest relief.
For small businesses and homeowners, these shifts may improve borrowing conditions toward the end of the year, although not dramatically.
Regulation changes for landlords & employment law
For private landlords there are big changes for the year ahead:
- MTD for Income Tax becomes mandatory from April 2026 for landlords with gross income over £50,000.
- Meaning quarterly digital reporting is introduced – a change from previous annual reporting.
This is a material administrative shift that alongside the Renters’ Rights Act – the biggest reform in nearly 40 years -will perhaps push many smaller landlords to reconsider their portfolios.
Labour‑intensive sectors such as hospitality, manufacturing and transport will feel the impact of: the Employment Rights Bill with:
- New day-one rights, including enhanced statutory protections
- Restrictions on zero‑hours contracts
- A new Fair Work Agency to enforce compliance
Sustainability & net zero
We may well see a slowing journey to net zero. With industry sources indicating that Automotive manufacturers are rebalancing away from rapid EV commitments – as the market cools thanks to a reduction in consumer demand, and charging infrastructure constraints – and continuing investment in petrol and diesel vehicles
However, some areas such as green energy investment still show growth, supported by public‑sector investment strategies.
See the key dates in 2026 for small businesses and personal finances here
2026 for small businesses
It looks like 2026 isn’t shaping up to be a year of dramatic expansion. Instead, it will likely reward businesses that:
- Stay agile, especially when it comes to workforce planning and compliance
- Adopt the right technologies, including AI, but without overcommitting during a volatile period
- Monitor costs closely, particularly for those in the hospitality, retail and property sectors
- And who engage with new reporting requirements early to avoid last‑minute disruption
With modest economic growth but improving inflation, 2026 may not be easy – but for those prepared to adapt, it offers a clearer, more stable landscape than the turbulent years behind us.
To discuss how we can support you with changes to your business in 2026, call us on 0330 059 6558 or email hello@scruttonbland.co.uk
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