Small businesses across the UK are at a financial crossroads as high interest rates and restricted access to traditional financing become a growth inhibitor, according to the 2025 Intuit QuickBooks Small Business Index Annual Report. The report confirms that UK employment declined for the second consecutive year and that employment growth is directly linked to a small business’ ability to secure credit.
With traditional financial institutions increasingly moving away from long-term borrowing, many UK small businesses are using credit cards as an alternative. This trend is being compounded by the differing financial strength of financial institutions and how their costs change in response to monetary policy. This shift is reshaping the borrowing landscape, placing additional financial strain on businesses, looking to access finance to support growth.
The Small Business Annual Index Report, developed in collaboration with leading global economist at the University of Chicago, Professor Ufuk Akcigit, and his co-authors, reveals that employment among UK small businesses (one–nine employees) fell for the second consecutive year, with 2,200 fewer jobs recorded in the previous 12 months to the end of October 2024. The data underscores the challenges faced by small businesses in accessing affordable credit.
Employment decline: Small business employment fell by 2,200 jobs year-over-year, with total employment reaching 4,287,700 jobs.
- Sector winners and losers:
- Construction created 7,500 jobs (+1.24%), emerging as the best-performing sector
- Professional services added 6,500 jobs (+1.22%), showing resilience amidst economic challenges
- Information & communication led the decline, shedding 6,700 jobs (-3.79%), followed by wholesale and retail trade (-6,300 jobs, -0.81%)
- Regional Disparities:
- Wales was the only UK nation with small business employment growth, adding 400 jobs (+0.22%). The other three UK nations all had declining employment
- The North East experienced the fastest decline (-0.31%), with 400 fewer jobs
- The Yorkshire and The Humber region bucked the trend, adding 700 jobs (+0.21%).
The credit card trend:
Due to their accessibility, flexibility and ability to address immediate financial needs, credit cards are a vital source of financing for small businesses. In fact, they are currently the number one source of financing for small businesses in the UK. Twenty-seven percent used a credit card for financing over the past 12 months, while only 15% secured a loan to fund their business expenses/growth. When asked about the proportion of expenses charged to credit cards, 33% of UK small businesses are charging more than 25% of their total monthly business expenses to credit cards.
Mind the ‘income gap’:
The Small Business Index Annual Report highlights a strong link between access to credit and employment growth. Small businesses that secured financing in 2024 were able to invest in their workforce and operations, whereas those without access experienced slower growth. However, interest rates and changing lending practices are making traditional loans harder to secure, with the report showing that higher interest rates have had an uneven impact on small businesses.