Three in four small business owners now pay themselves under £20,000 a year, up from 63% in 2025, new research reveals.
For entrepreneurs who employ staff the figure is 65%, an increase from 48% last year, which the report by Enterprise Nation said is “evidence that owners are increasingly paying their staff and costs first, and themselves last”.
In other findings, appetite for external funding fell to the lowest point since the quarterly survey began tracking it in Spring 2023. Two fifth of small businesses said they plan to look for finance in the next 12 months, down from a peak of 63% in Autumn 2023.
Among those still seeking funding, the amounts requested have shrunk: 40% wanted under £10,000, up from 27% a year ago, suggesting businesses are looking for smaller top-ups to see them through rather than funding for growth.
As the government’s new legislation aimed at tackling late payment continues its progress through Parliament, the report found the issue of overdue invoices has become significantly more widespread. 42% of small businesses said they have been paid late in the last year, almost double the 24-34% seen consistently during 2023 and 2024.
Confidence in business expansion fell to 41%, down from 50% a year ago and among the lowest readings recorded across the survey’s history. The sharpest falls were concentrated in food and drink (down 18.6 points to 40%) and general retail (down to 33%).
Against the backdrop of financial pressure, digital adoption continues to accelerate. 64% of small businesses said they now use AI tools such as ChatGPT or Gemini, up from 59% a year ago.
Despite this, fewer businesses describe themselves as “mainly digital” (35%, down from 43%), which the report said “may reflect a changing definition of digital operation: platforms such as Etsy, Instagram and TikTok Shop increasingly offer a ready-made shopfront without the need for a business’s own website.”
When looking at founders by age, 18-24 year-olds were more likely to have started their business as a side hustle (60%) than over-50s (32%). Younger founders were more motivated by earning money and turning a skill into income, while over-50s leant more towards work/life balance.
Both groups said lowering the tax burden should be government’s top priority as the Budget approaches, cited by 54% of 18-24s and 59% of over-50s.
Aaron Asadi, CEO of Enterprise Nation, said:
“This year’s Barometer shows small business owners absorbing pressure personally. Three in four are now paying themselves less than £20,000 a year, and that number only gets worse once a business takes on staff. People are protecting their teams and their customers by taking the hit themselves, that’s not a sustainable position for the UK’s key driver of the economy.
“At the same time, the funding appetite has hit a record low. That’s not businesses losing ambition, it’s owners telling us plainly that the environment doesn’t currently support the risk of borrowing to grow.
“Ahead of the Budget, we need measures that ease the pressure on owner pay directly, get a grip on late payments, which are now costing small firms £26 billion in overdue invoices at any one time, and restore the confidence to invest in growth again.
“It’s encouraging to see AI adoption continuing to accelerate, but we know only 27% of UK SMEs use AI regularly, just 6% daily, yet AI is the single most in-demand topic across our whole network.
“We can’t ignore that business support isn’t working for everyone, male founders in particular are increasingly coming away empty-handed when they seek advice, and that’s a gap we need to close.”