Letting and estate agents are heading into a fresh cost crunch this April as rising business expenses threaten to derail a fragile recovery in small business confidence.
New data from the Federation of Small Businesses shows sentiment remains deeply negative, despite a slight improvement at the start of 2026.
The Small Business Index rose to -53 in Q1, up from -71 in the previous quarter, but confidence has now remained below zero for eight consecutive quarters.
For agents already grappling with regulatory change – including the looming Renters’ Rights Act and Making Tax Digital – the timing of new cost pressures is unlikely to help.
HIGHER BUSINESS RATES
April’s increases include higher business rates, rising energy standing charges, a jump in the National Living Wage and expanded Statutory Sick Pay requirements, all of which will feed directly into agency cost bases.
At the same time, 87% of small firms report rising costs year-on-year, with over a quarter seeing double-digit increases. Taxation, labour and utilities remain the biggest drivers.
Revenue pressure is also building, with more than half of small firms reporting falling income, while nearly half expect conditions to worsen in the months ahead.
That is already feeding through into hiring decisions, with more firms cutting staff than recruiting – a trend likely to impact agency headcounts and expansion plans if sustained.
The warning signs come as geopolitical tensions and energy market volatility add further uncertainty, compounding existing pressures on margins.
BLEAK OUTLOOK
Tina McKenzie (main picture), Policy Chair at the Federation of Small Businesses, says: “Sentiment among the community remains low, driven by mounting costs stemming from policy decisions made by ministers.
“The outlook for small business growth is bleak, and you can’t get growth in the economy relying just on the UK’s large corporate firms who are feeling relieved after the last Budget.
“Small businesses need a cushion to absorb the costs kicking in over the course of the year, because without changes to business rates, help with energy costs, an SSP rebate and a delay in dividend tax increases, it leaves them in a very vulnerable place.
“If the Middle East crisis continues to escalate then the Government must keep an open mind about creating targeted business support for those most in need.”
BRUTAL STORY
And she adds: “The numbers tell a brutal story, and behind every one of these numbers are business owners who went to bed last night wondering if and how they can make it work.
“We should be encouraging more people to take the leap and start their own business, while existing businesses want to hire, invest and grow. But they can’t do any of that when they’re busy worrying about bills.
“The next King’s Speech must deliver on the promise to stop large firms paying small businesses late. The UK is unique in being a place where late payment has been considered as acceptable, and the toughest legislation in the G7 cannot come soon enough.
“The Government must tackle rising costs head on and give firms the support they need to take on staff and plan with confidence. Without that, these early signs of recovery risk slipping away before they’ve had a chance to take hold.”
