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It was difficult to read the news or listen to a politician without feeling pessimistic about the UK economy in 2025. Unemployment rose, public services collapsed and companies faced higher taxes from a government that came to power promising to boost growth, only to reduce it.
So what is causing the high spirits of so many entrepreneurs in the UK? They are optimistic by nature, but a recent global survey of company founders by private bank HSBC was still surprising. Three-quarters of people living in Britain were very positive about the business outlook and the country ranked first in the world in terms of optimism, surpassing not only Europe but the US.
This sound was no anomaly: other leadership surveys have also delivered bullish results, and Lloyds Bank’s barometer of UK business confidence rose in December. While business leaders complain more strongly in private than in public about government policy, many remain confident in their own enterprises and expect expansion in the coming year.
This may reflect survivorship bias, given that British businesses have experienced a series of economic setbacks. The Brexit vote in 2016 caused political instability and trade friction, and was followed by the pandemic and high inflation. Then energy prices took a hit due to Russia’s invasion of Ukraine. Those who are still solvent have learned financial flexibility the hard way.
In the words of the D:ream song adopted by Labour’s election campaign in 1997, the notion that “things can only get better” has been repeatedly discredited. But there is still some truth in it. The UK economy has suffered devastation, including the loss of 480,000 businesses since 2020, but is experiencing modest growth. This could be the right time to invest.
My visits to UK companies over the past 18 months have encouraged that approach. Many companies are family or privately owned, rather than the public companies that people hear most about. The best are managed very professionally, sometimes with the backing of private equity funds. They are ambitious to expand, including into international markets, and are far from despairing.
Of course, there are good reasons to be concerned about the direction of Britain’s economic policy. As Ren Newton-Smith, director general of the CBI Business Group, told me, “You can’t just add costs to businesses and expect them to grow.” Employers are still adjusting to the higher national insurance contributions set in the 2024 budget, along with a sharp rise in minimum wage levels, particularly for under-20s.
British companies face the highest electricity costs among the G7 group of countries, with only limited relief offered in the November budget. Productivity growth has been poor for more than a decade and business investment is expected to remain weak this year, despite the Bank of England cutting interest rates. The new Employment Rights Act will increase complexity and make recruitment difficult.
But the government is also doing some positive things for the business environment. The industrial strategy presented last June rightly focused on the sectors that have the greatest growth potential in the UK. Its efforts to re-establish damaged trade ties with the EU, including rejoining the Erasmus+ student exchange programme, need to go further, but are a step in the right direction.
Britain’s economy also has enduring strengths. “Britain has fallen out of love with the things it is good at,” economists Andrew Sissons and John Springford recently wrote, “but it is being forced to reevaluate.” Industries such as financial and business services, life sciences, media and technology are not only self-productive but also attract other investments.
This was reflected in HSBC’s survey: many entrepreneurs value the UK’s professional resources, particularly in service clusters in London and the south-east. The country’s road and rail networks may be patchy but it has a strong corporate support structure: “If I want to meet a lawyer or an accountant I don’t have to get on a plane,” said one executive.
In any case, leaders cannot wait for a rising tide to lift all business boats: after a heavy stress test, the winners can afford to take some risks. Many have solid balance sheets and the strength to invest in growth or acquire competitors. Fintech and energy start-ups are already using technology to disrupt large incumbent companies.
Perhaps this is why many UK entrepreneurs are in good spirits. The economy has been quite resilient, and times when many people are unhappy are often a good opportunity. They are looking towards the future and have not succumbed to despair.
john.gapper@ft.com
