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SMB health is at its lowest level in three years

Small and medium businesses are suffering, as confidence plummets, costs increase and revenue growth slows.

The quarterly SME Health Check Index, put together by the Centre for Economics and Business Research (CEBR) and CYBG, is at its lowest level since early 2014, falling from 56.3 in Q2’17 to 46.9 in Q3.

Six of the eight indicators have worsened since the previous quarter: employment; net business creation; confidence; capacity; revenue; and business costs fell (this is a negative in respect to the last indicator). GDP and lending were up, although only by small amounts.

North east England, the west Midlands and Yorkshire – areas prioritised by the Government for investment – experienced the sharpest declines. They fell by 25.9, 16.8 and 15.4 points, respectively. The only areas to increase were Scotland and the east of England (up five and one points, respectively).

Brexit uncertainty was thought to be a major factor in the poor business performance. While Brexit is expected to affect all sectors and sizes of business, small firms will feel this most as they are the least able to absorb significant cash flow changes or deal with new regulations.

The UK’s 5.5 million SMEs make up the majority of companies in the country, employing about 60 per cent of the people in the private sector (16.1 million). They also output more than half of the UK’s total business revenue: £1.9 trillion annually. The CEBR and CYBG say that sustained poor performance would have a serious impact on the country’s economy and are calling on the Government to do more.

David Duffy, CEO of the CYBG, said: “The recent announcements made by the Chancellor in his Budget to help SMEs, especially on business rates, were very welcome. We also welcome the publication of the Industrial Strategy White Paper and the important measures this includes to build long-term prosperity, particularly outside of London and the South East.  However, what is clear, is that more needs to be done in the short term to help boost confidence amongst SMEs while we wait for the longer-term benefits of some of these policies to take effect.”

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