Findings from the Sage Small Business Tracker Q4 2025

Sage Quarterly Summary

The latest Sage Small Business Tracker showed robust profit growth for small businesses, despite a lacklustre economic growth environment. Profits rose as growth in revenues outpaced expenditures. In real terms, both overheads and capital expenditure fell year-on-year, reflecting a more defensive footing among small businesses, who sought to protect margins by cutting costs and postponing investment. 

The UK economy grew by 1.0% in the year to Q4 2025, a reduction in pace from the 1.3% recorded in Q3. The final quarter of 2025 was overshadowed by trade shocks and the impact of the budget. Business sentiment remains fragile, as firms continue to face uncertainty over the strength of consumer demand.

Key Highlights

• Profits showed strong growth – Small business profits grew by 6.2% in the year to Q4 2025. This marks the fourth consecutive quarter of accelerating growth and represents the highest pace of growth in almost four years. 
• Revenues rose robustly – Real revenues for small businesses rose 3.3% annually in Q4 2025, marking the third consecutive quarter of yearly growth. Overall, 2025 featured significantly more consistent and elevated rates of revenue growth than 2024. 
• Expenditure growth accelerated – Real expenditure for the average small business increased by 2.1% year-on-year in Q4 2025. Since expenditures rose more slowly than revenues, this permitted an acceleration in profit growth. 
• Productivity fell, in contrast to the other indicators – Productivity for the average small business fell by 2.6% in Q4 2025, following near-stagnation the previous quarter.

Sage Forecast

Looking ahead, the UK economy is expected to maintain modest growth in the near term. Inflation is projected to continue falling, creating scope for near-term interest rate cuts. Slowing wage growth should help to ease labour cost pressures, which are contributing to weaker hiring activity and recent rises in the unemployment rate (as seen in the monthly SMB workforce tracker).

To explore the full insights and analysis, you can read the full report here.