New research from Paragon Bank suggests that while small and medium-sized enterprises still broadly support the government, that confidence may be short-lived unless the chancellor delivers relief on taxes and business costs in the Autumn Budget.

The survey of 1,000 SME leaders and decision-makers found that 42% want the government to prioritise employee tax and cost measures, with business tax reform (36%) and business rates (35%) also ranking high on their list of concerns. Other key areas include incentives for innovation and investment (30%), skills and training (27%) and access to finance (26%).

Many firms have already felt the impact of measures announced in the previous Autumn Budget. The rise in employer National Insurance contributions affected nearly three quarters (73%) of SMEs, while 69% were hit by the increase in corporation tax. The national minimum wage rise (64%) and capital gains tax increase (59%) also added to pressure on margins.

Almost half of respondents (47%) said rising operational costs are their biggest challenge, followed by employment costs (36%) and access to finance (29%).

Despite this, 45% of SME leaders rated the government’s support for small businesses in its first year as “good”. That view, however, varied sharply across industries. Just 15% of construction firms were positive about the government’s efforts, compared with 61% in farming and agriculture.

When asked whether they believe the government understands the needs of their sector, 61% of SMEs said they felt “very” or “somewhat” confident. Confidence was lowest among arts and entertainment firms (24%) and highest among those in education (46%).

OUTLOOK FOR 2026

Even with rising costs and continuing uncertainty, business owners remain remarkably upbeat about their own prospects. Nearly two thirds (65%) said they were optimistic about their company’s outlook over the next year, though less than half (47%) felt the same about the wider UK economy.

Phil Hughes, deputy managing director of Paragon SME Lending, said: “SMEs are the backbone of UK business and when they fail, the economy fails. This latest research reveals their clear message to government: adding more cost and taxation will only hinder growth and innovation.

“As a lender working with 16,000 SMEs at the coalface – from manufacturers and farmers to construction companies and hauliers – we see firsthand the headwinds they face, and whilst they remain as adaptable and ambitious as ever, ongoing Budget uncertainty only intensifies an already challenging operating environment.

“While SME sentiment towards government is currently somewhat favourable, policymakers shouldn’t count on it for long.

“To earn long-term confidence the chancellor urgently needs to give SMEs clarity on how the government is going to kickstart this promised growth and ease the burden of increasing operational costs.”