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Posted: Tue 4th Aug 2026
Last updated: Tue 4th Aug 2026
5 min read
Small business owners are taking the financial strain personally, with 76% now paying themselves less than £20,000 a year.
That's one of the headline findings from Enterprise Nation's Small Business Barometer for Q2 2026.
The report points to continued pressure on owners' incomes, falling confidence and a record-low appetite for outside funding.
Late payments are also affecting a much larger share of businesses than they were a few years ago.
Yet small firms are still adopting new technology, seeking advice and, in many cases, planning to take on more staff.
The proportion of small business owners earning less than £20,000 has risen sharply from 63% in 2025 to 76% this year.
The increase is particularly striking among businesses that employ staff. Nearly two-thirds (65%) of these owners now pay themselves below £20,000, compared with 48% a year ago.
The figures suggest many founders are protecting employees' wages and covering other business costs by reducing the amount they take home themselves.
That may keep a business moving in the near term, but it leaves owners with little room to absorb another rise in costs or fall in income.
Just 40% of small businesses expect to seek outside funding over the next 12 months.
That's the lowest proportion recorded since our Small Business Barometer in spring 2023 and well below the peak of 63% reported in autumn 2023.
Businesses that do plan to apply are also looking for smaller amounts. More than four in 10 want less than £10,000, compared with 27% a year ago.
This may reflect a more cautious approach to borrowing.
Some businesses appear to be seeking modest injections of cash to meet immediate needs rather than taking on larger commitments to fund expansion.
Late payments affected 42% of small businesses during the past 12 months.
Through 2023 and 2024, the proportion reporting late payments remained between 24% and 34%. The latest figure is, therefore, a significant increase and marks a second year at this elevated level.
Money arriving late can make it harder to pay suppliers, cover wages and plan ahead. According to the Small Business Commissioner, £26 billion is tied up in overdue invoices at any given time.
The Commercial Payments Bill announced in the 2026 King's Speech is intended to address the problem.
Its proposed measures include limiting large companies' payment terms to 60 days, making interest on overdue invoices mandatory and strengthening enforcement against businesses that repeatedly pay late.
The proportion of small businesses confident that they will expand has fallen to 41%, down from 50% a year ago.
Confidence varies considerably by sector. Among technology businesses, it's risen to 73%, while food and drink businesses recorded an 18.6-point fall to 40%. Confidence among general retailers stands at 33%.
Despite the more subdued outlook, businesses that already employ staff haven't significantly altered their hiring intentions. Their appetite to take on more people has remained broadly stable compared with last year.
Nearly two-thirds (64%) of small businesses now use artificial intelligence (AI) tools such as ChatGPT or Gemini. That's up from 59% in 2025.
Adoption is highest in the South East, where 78% of businesses use AI, followed by London at 68%. The East of England records the lowest use at 35%.
At the same time, the proportion of businesses describing themselves as "mainly digital" has dropped from 43% to 35%.
One possible explanation is that selling through platforms such as Etsy, Instagram and TikTok Shop has become a normal part of running a business, rather than something owners necessarily define as a digital business model.
Two-thirds of business owners sought advice or support during the past year. But the experience differed sharply between male and female founders.
Among male business owners who sought support, 40% said "nothing worked for me", up from 27% last year. That figure rises to around half among male founders who employ staff.
Female founders were more likely to seek support, with 69% doing so compared with 58% of male founders, and reported no equivalent decline in its usefulness.
The Barometer also highlights differences between generations.
Six in 10 founders aged 18 to 24 started their business as a side hustle, compared with 32% of those aged over 50. Younger founders are also more likely to continue running their business alongside another job.
However, both age groups agree on what they most want from the government – a lower tax burden. This was cited by 54% of founders aged 18 to 24 and 59% of those over 50.
The full Small Business Barometer explores these findings in more detail, including differences by sector, region, age and gender.
