The cost-of-living crisis now threatens growth plans for nine in ten UK small businesses, according to new figures from Novuna Business Finance. The Business Barometer study, which has monitored the growth outlook of UK small business owners every quarter since 2015, reveals that 90% of small businesses say aspects of the increased cost of living threaten their growth plans for 2026. This represents a three-year peak in threat perception, with the level rising slightly from broadly consistent readings since 2022. The findings suggest businesses face sustained rather than temporary challenges. This requires long-term adaptation rather than short-term crisis management.

More than two in five small businesses-42%-express concern about clients or customers spending less money with them. The hospitality sector feels this pressure most acutely, with 60% of enterprises worried about reduced customer spending. Retail businesses face even steeper challenges, as 72% report concerns about declining customer expenditure. Beyond spending levels, one in two hospitality small businesses-48%-worries that cost-of-living pressures will result in a drop-off in overall customer volume this summer.

Supplier Cost Pressures Create Margin Squeeze

The challenge of managing rising costs creates a significant financial squeeze for many enterprises. A third of small businesses-33%-say they have been forced to absorb rising costs from their suppliers. However, 35% report they cannot pass inflationary price rises on to their own customers. Manufacturing businesses feel the impact of absorbing supplier costs most intensely, with 53% reporting this challenge. Agricultural enterprises face similar pressures, as 51% must absorb rising costs from suppliers.

Small businesses operating in hospitality and retail sectors face the greatest difficulty passing costs forward to customers. Both sectors report that 53% of enterprises cannot pass inflationary costs on to their customers. The combination of persistent cost pressures and uncertain consumer spending creates challenges. UK small businesses entering the second half of 2026 must navigate this difficult environment. With the majority unable to absorb supplier costs indefinitely, businesses require strategic financial planning. Many also face limitations on price increases and need access to flexible capital sources.

Energy and Operational Costs Burden Multiple Sectors

Energy costs negatively impact small businesses across the country. Nationally, 32% of business owners express concern about the impact of soaring energy prices on business running costs. An additional 29% worry about the rising cost of transportation and logistics. These cost impacts come in addition to the one in four enterprises-25%-that worry about rising rents and the burden of business rates. The impact of energy costs hits three sectors particularly hard. Manufacturing businesses lead with concerns, though specific percentages vary by sector. Agricultural enterprises also report significant energy cost worries. Transport and distribution companies face substantial challenges from rising energy prices.

One in five small businesses-21%-fear not being able to pay staff more money to help salaries stay in line with the rising cost of living. This figure represents an increase from 16% two summers ago, demonstrating growing pressure on wage budgets. The wage pressure compounds other operational challenges as businesses attempt to retain talent while managing multiple cost increases simultaneously.

Alternative Financing Options Gain Importance

Private credit provides flexible, long-term capital for thousands of small and mid-sized businesses that may not have access to traditional bank loans, according to industry data. The financing option supports well-paying jobs and real economic activity across sectors from manufacturing and healthcare to infrastructure and energy projects. The American Investment Council represents over two-thirds of the private credit industry in Washington. Private credit loans can be tailored to the specific needs of borrowers, offering an alternative to traditional bank lending.

Companies of all sizes and sectors receive private credit loans, including healthcare, infrastructure, technology, and IT. Instead of owning part of a company as private equity funds do, private credit provides loans that help strengthen and scale businesses. The U.S. Securities and Exchange Commission regulates private credit funds, which are structured to prevent risk. A recent report from the U.S. Government Accountability Office found that private credit lending practices are appropriate. The debt structure, documentation, and underwriting are robust and adequately protective of lenders, according to the assessment.

Community Development Financing Shows Growth

Citizens Financial Group Inc. provided more than $2 billion in community development financing in 2025, supporting the construction or rehabilitation of more than 8,000 affordable housing units. The Providence-based bank reported these figures in its “2025 Sustainability & Impact Report” released Monday. Citizens also reported more than $300 million in small-business lending and more than $20 million in philanthropic investments during the year. The bank expanded workforce development programming and continued progress toward long-term sustainability targets.

“As we recognize America’s 250th anniversary, we are proud to build on the long-standing role Citizens has played in supporting the communities we serve,” Chairman and CEO Bruce Van Saun said. “The progress reflected in this year’s ‘Sustainability & Impact Report’ demonstrates what is possible when investment is matched by action and the dedication of our colleagues.”

Alongside the report, Citizens announced a nationwide volunteer initiative tied to America’s 250th anniversary. The bank mobilizes employees for more than 250 volunteer opportunities across its footprint through Veterans Day. The initiative focuses on financial education, workforce readiness, neighborhood revitalization, and environmental stewardship. Citizens partners with nonprofit organizations including New York Cares, Boston Cares, Philadelphia 250, Jersey Cares, and Pittsburgh Cares. The effort engages employees in hands-on service projects as part of the broader national commemoration leading up to the semiquincentennial in 2026.

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