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Britain’s small businesses are failing to reap the rewards of the government’s post-Brexit trade deals, as red tape, tariffs, and weak confidence leave exports flatlining and financial distress mounting across SMEs, according to a new report. New figures from the British Chambers of Commerce (BCC) show that 84 per cent of firms with fewer than 10 employees reported flat or falling export orders in the third quarter of 2025, despite a series of new agreements with major partners like the US, EU and India. The figures found that just one in four exporters reported rising sales or orders, with “sentiment among all exporters” remaining weak. Larger firms fared better, with 42 per cent of those with over 250 employees seeing export growth. But small enterprises have been left struggling to navigate complex customs and compliance rules, according to the report. Head of trade policy at the BCC, William Bain, called the results “deeply concerning”, warning that unless smaller firms receive more support, the economic gains promised by new trade deals would fail to materialise. “As these deals and strategies are implemented, new smaller exporters need greater help to fully reap the benefits”, Bain said, adding that a two per cent increase in UK exports could boost long-term GDP growth by 0.6 per cent. Red tape and tariffs The BCC’s call for more support comes as the Department for Business and Trade (DBT) faces budget cuts of around 20 per cent. Employees told the Financial Times that staff morale was “very low”, with some advisers reportedly told to hold all meetings online to cut costs. Trade minister Sir Chris Bryant insisted that the government remained committed to expanding exports, pointing to a £20bn increase in lending capacity for UK Export Finance, which provides financial support to exporting SMEs. “We agree that boosting exports is great for productivity, jobs and economic growth,” Bryant said. “International Trade Week will get more firms seizing the opportunity to sell their goods and services around the world.” But, the World Trade Organisation (WTO) has warned that UK trade’s contribution to GDP growth has “stagnated” since the pandemic, citing a study showing that exports to the EU from UK-based SMEs fell 30 per cent after Brexit, with more than 16,000 small firms ceasing EU exports altogether. “The ability to trade with Europe is very difficult – we lost our markets due to Brexit, and trading with the US is very hard and expensive due to tariffs and business uncertainty”, a small British service firm told the BCC report. Chris Southworth, secretary general of the UK International Chamber of Commerce, added: “Smaller firms face structural barriers that limit growth, particularly with EU trade. Chief among them is the antiquated trade bureaucracy that followed our exit from the EU.” Sharp rise in financial distress The struggles facing exporters come amid a broader deterioration in the health of Britain’s small business economy. New data from Begbies Traynor’s Red Flag Alert recently showed that 55,530 UK firms were in ‘critical’ financial distress at the end of last month, which is a 12.6 per cent jump on the previous quarter, and a 78 per cent rise year-on-year. Partner Julie Palmer warned that the figures showed the economy was “in real trouble,” with consumer-facing sectors such as leisure, hospitality and retail hit hardest. “The Autumn Budget must deliver urgent support to avoid a wave of failures, especially among SMEs already operating on a knife edge,” she added. Hotels and accommodation businesses saw distress rise 92.5 per cent year-on-year, while general retailers were up 85.6 per cent. Begbies Traynor said high inflation and rising costs were forcing many firms to cut staff and delay investment just when growth is most needed. Executive chairman Ric Traynor added: “Many have already delayed investment or reduced headcount to preserve capital, and it does not look like we will see small and medium businesses start to invest for growth again for some time.” Low confidence Business confidence has also weakened as inflation remains stuck at 3.8 per cent, well above the Bank of England’s two per cent target. A recent survey by the National Federation of Independent Businesses (NFIB) found its optimism index fell two points to 98.8 in September, while the uncertainty index rose to a near-record 100. Douglas Grant, chief executive at Manx Financial Group, warned that many SMEs have exhausted pandemic cash reserves and are now “operating on thin credit lines”. “Rising costs are hitting from all directions,” he added. “Without lower inflation and stable borrowing conditions, viable small businesses could be forced to cut back or close altogether.” The Office for National Statistics (ONS) reported little sign of easing price pressures, with petrol and airfares driving the latest rise. Chancellor Rachel Reeves has pledged to “support the Bank of England in bringing inflation down” ahead of the Autumn Budget later this month. SME resilience tested SMEs make up 99 per cent of UK private-sector firms, employ 60 per cent of the workforce and account for over half of business turnover, but economists warn they risk being left behind as policy focus shifts to large-scale trade. Since Labour’s 2024 election victory, business groups have complained of rising taxes, red tape and limited targeted relief for smaller firms. Polling by Conservatives for Business found 59 per cent of SME leaders lack confidence in the economy, with more than half reporting declining profitability. Economist George Brown at Schroders said persistent inflation and weak productivity could “choke off investment just as the recovery stalls”. For now, small businesses remain characteristically resilient, but that patience, Bain warned, “isn’t infinite”. “The reality is that our smaller exporters have the ideas and ambition,” he said. “But the conditions around them – bureaucracy, tariffs and cost pressures – simply haven’t kept pace.”
