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It was difficult to read the news or listen to a politician talk in 2025 without becoming dejected about the UK economy. Unemployment rose, public services remained overstretched and companies faced higher taxes from a government that came to office pledging to boost growth, only to dampen it.
So what explains the high spirits of so many entrepreneurs in Britain? They are hopeful sorts by nature, but a recent global survey of company founders by HSBC’s private bank was still surprising. Three quarters of those based in the UK were very positive about the business outlook and the country ranked first in the world for optimism, beating not only Europe but the US.
This sounding was not an anomaly: other leadership surveys have also produced bullish results, and Lloyds Bank’s barometer of UK business confidence rose in December. While business leaders tend to complain even more strongly in private than in public about government policy, many have confidence in their own enterprises and expect to expand in the coming year.
That may reflect survivorship bias, given that British businesses have experienced a series of economic setbacks. The Brexit vote in 2016 caused political volatility and trade friction, and was followed by the pandemic and higher inflation. Then came an energy price shock caused by Russia’s invasion of Ukraine. Those that are still solvent have learnt financial resilience the hard way.
The notion that “things can only get better,” in the words of the D:Ream song adopted by Labour’s election campaign in 1997, has been repeatedly discredited. But there is still some truth to it. The UK economy has endured destruction, including the loss of 480,000 businesses since 2020, but is growing modestly. This could be the right time to invest.
My visits to UK companies in the past 18 months have encouraged that view. Many are family or privately owned, rather than the public companies about which one hears more. The best are very professionally managed, sometimes with backing from private equity funds. They are ambitious to expand, including to international markets, and far from depressed.
There are rational reasons to worry about the direction of UK economic policy, of course. As Rain Newton-Smith, director-general of the CBI business group, told me, “You cannot just add costs to businesses and expect them to grow.” Employers are still adjusting to higher national insurance contributions set in the 2024 Budget, along with sharp rises in the level of minimum wages, especially for under-20s.
British companies face the highest electricity costs in the G7 group of countries, with only limited relief in the November Budget. Productivity growth has been poor for more than a decade and business investment is expected to remain subdued this year, despite the Bank of England’s interest rate cuts. The new Employment Rights Act will add complexity and make hiring harder.
But the government is also doing some positive things for the business environment. The industrial strategy that it unveiled last June correctly focused on sectors in which the UK has the greatest growth potential. Its attempt to reset damaged trade relations with the EU, including rejoining the Erasmus+ student exchange programme, needs to go further but has been a step in the right direction.
The UK economy also has enduring strengths. “Britain has fallen out of love with the things it is good at,” the economists Andrew Sissons and John Springford wrote recently, but it is being forced to reassess. Industries such as financial and professional services, life sciences, media and technology are not only productive themselves but attract other investment.
This was reflected in HSBC’s survey: many entrepreneurs value Britain’s professional resources, particularly in the services cluster in London and the south-east. The country’s road and rail network can be patchy but it has a strong corporate support structure: “I don’t need to get on a plane if I want to see a lawyer or accountant,” said one executive.
In any case, leaders cannot wait for a rising tide to lift all business boats: having been heavily stress tested, the winners can afford to take some risks. Many have solid balance sheets and the strength to invest in growth or acquire competitors. Fintechs and energy start-ups are already using technology to disrupt larger incumbent companies.
This could be why so many UK entrepreneurs are in a good mood. The economy has been quite resilient, and periods when many people are unhappy are often a good opportunity. They are looking to the future and have not succumbed to gloom.
john.gapper@ft.com
