Swedish small business owners are experiencing the weakest economic conditions since measurements began in 1985. Profitability is falling and six out of ten are worried about the future. At the same time, there is hope for a turnaround in 2026, according to this year's Small Business Barometer.

The year 2025 has been marked by continued difficulties for the country's small business owners. The expectations of improvement that existed during last year's measurement have not been fulfilled. On the contrary, the latest Small Business Barometer, published by Företagarna (the Swedish Federation of Business Owners), Swedbank, and the Swedish Savings Banks Association, shows that the economy has weakened further.

The overall economic indicator drops to -13.4, compared to -11 the previous year. This means that the measurement has been below the historical average for the sixth consecutive year. Small businesses are thus in the midst of an unusually prolonged period of economic adversity. Six out of ten business owners feel worried about the development.

Despite the bleak current situation, there are still signs of improvement. Looking ahead to next year, the economic indicator is expected to rise to 60, which approaches the historical average of 66.

— That investment plans are paused or cancelled is often a consequence of uncertainty. Companies carefully weigh the risks and prioritize keeping liquidity intact. It's a pattern we recognize from previous economic downturns, but also a behavior that can turn around quickly when confidence returns, says Jörgen Kennemar, business economist at Swedbank.

Shrinking margins

Profitability development gives cause for concern. The proportion of companies reporting good profitability has decreased from 84 to 77 percent. At the same time, the share earning enough to invest in the future has dropped from 50 to 42 percent. Most worrying is that 22 percent of companies now have difficulty making their operations financially viable, an increase from 16 percent the year before.

— The decline in profitability is a sign that margins are shrinking as high cost pressure has taken hold. Many companies choose to wait with investments until they see more stable demand and lower interest rates. It's rational, but at the same time means that the recovery risks being prolonged, notes Björn Elfstrand, CEO of the Swedish Savings Banks Association.

Weak demand slows growth

Lack of demand has become the primary growth obstacle for small businesses. Nearly one in four business owners, 24 percent, point this out as the biggest problem. Close behind comes difficulties in recruiting the right competence, which 15 percent cite as the main obstacle.

When business owners are asked what worries them most, 29 percent answer that they fear a sharp decline in customers' purchasing power.

— That demand is now highlighted as the biggest growth obstacle shows that the recovery is sluggish. It's a signal that households are holding tight to their wallets and that companies are therefore finding it increasingly difficult to grow in the domestic market. For the economy to turn around, a clear shift in consumption patterns is required, says Karl Ernlund, chief economist at Företagarna.