One in Five UK Entrepreneurs Consider Leaving as Government Policy Falls Short

LONDON — One in five UK entrepreneurs are considering relocating abroad, according to a survey that found 86% believe government policy does not support their needs.

The findings come as UK businesses face growing pressure from rising energy costs, higher borrowing rates and weakening demand. Around 75% of entrepreneurs report difficulty raising investment, while two-thirds face hiring challenges.

The Credit Protection Association, which compiled the survey, said falling confidence is reducing business formation, investment and overall economic momentum.

Labour market pressure

UK payrolls fell by 49,000 in February, while vacancies dropped to 721,000. Unemployment is expected to rise to 5.3% this year and potentially 5.5% by summer.

Wage growth has slowed to 3.8%, down from expectations of 4%, signalling a cooling labour market. Retail employment dropped to a record low of 2.81 million, with jobs falling by 68,000 year-on-year.

Youth employment is declining even faster, with warnings that automation and artificial intelligence could accelerate job losses further.

Interest rate reversal

The Bank of England held rates at 3.75% but warned inflation could rise to 3.5% in the near term, with some economists suggesting it could reach 5% if energy prices remain high.

Markets are now pricing in up to three rate hikes this year, with expectations for the base rate to reach 4.5% by year-end. Mortgage rates have already jumped, with two-year fixes rising from 4.83% to 5.32% in March.

Higher borrowing costs increase pressure on both businesses and their customers, raising the risk of delayed payments and insolvencies.

Construction slowdown

Around 70% of small and medium-sized housebuilders say they are delaying new developments, while 25% are cutting land purchases. London housebuilding is forecast to fall to just 4,550 homes by 2028.

The slowdown signals wider economic contraction and fewer opportunities across supply chains that depend on construction activity.

Property market weakness

Prime London property sales dropped 31% year-on-year in February, with prices down 10%. Listings above five million pounds have risen by 10%, adding further downward pressure.

Weakness in high-value property markets can signal broader economic slowdown and reduced liquidity across the economy.

Government borrowing

Government borrowing came in at 14.3 billion pounds in February, driven by debt interest payments of 13 billion pounds, the highest ever for the month.

With energy costs rising further, there are growing concerns that the government's fiscal targets could be derailed, increasing the likelihood of future tax rises or reduced spending.

The government has responded to some pressures by raising steel tariffs from 25% to 50% and cutting import quotas by 60% to shield domestic producers from low-cost competition. However, protection measures may increase material costs for businesses in construction and manufacturing.

Energy costs

Brent crude briefly surged above 119 dollars per barrel before easing back toward 107 to 109 dollars as geopolitical tensions escalated across the Middle East. Attacks on energy infrastructure and threats to the Strait of Hormuz continue to drive volatility.

Rising fuel and energy costs feed directly into business overheads and reduce customers' ability to pay on time. A fire at Shell's Pearl GTL facility in Qatar, following regional attacks, underlines continued vulnerability in global energy infrastructure.

Global context

The Federal Reserve in the United States plans to reduce capital requirements by 4.8% for major banks and up to 7.8% for smaller institutions. The move marks a shift away from post-2008 regulatory tightening.

Easier lending conditions in the United States may support credit availability but increase longer-term financial risk. UK businesses face a more challenging environment as the Bank of England moves in the opposite direction.

The Bank of England confirmed it will not accelerate its private credit stress testing, with results not expected until early 2027 despite concerns over systemic risk.