Employment fell by 25,000 across SW over last three months
The health of small and medium-sized enterprises (SMEs) in the UK remains at its lowest level in three years, according to the SME Health Check Index, a quarterly economic index compiled by leading economics consultancy - Centre for Economics and Business Research Limited (Cebr) in association with CYBG PLC, owner of Clydesdale and Yorkshire Banks.
These are unprecedented times for many SMEs and the latest index shows that things are getting even tougher, with the results presenting little improvement since the last quarterly index review.
Overall the latest index is down to its lowest level since early 2014 and this is driven by a number of key outlook indicators taking a knock in the last quarter – confidence has plummeted, input costs are up and revenue growth has slowed.
Employment, revenue, confidence and net business creation are all down compared to the last quarter, the latest SME Health Check has found. Businesses in the North and Midlands were found to be the worst hit – areas of the country that have been prioritised by the Government and where there already exists a substantial gap in growth compared to London and the South East.
The quarterly report combines various statistics and indicators to evaluate the health of business and the environment that they are operating in. The Index takes on values between 0 and 100. A score of 100 would indicate maximum improvements across the Index’s eight indicators while a score of 0 would point to major declines in the indicators. Overall the Index fell from 56.3 in Q2 of 2017 to 46.9 in Q3. This is the lowest reading since the Index began in 2014. Six out of the eight indicators of the SME Health Check Index have worsened since the previous quarter.
The North East, West Midlands and Yorkshire have experienced the sharpest declines, with the regions’ SME Health Check Index scores falling by 25.9, 16.8 and 15.4 points respectively.
Uncertainty caused by a lack of clarity in the Brexit negotiations is thought to be a major factor in the low performance of businesses.
That is important because SMEs face a great deal of uncertainty, particularly because of the lack of clarity around the Brexit negotiations. While all firms would be impacted by a poorly-managed exit from the EU, it is SMEs who will feel this most as they are least able to absorb significant changes to their cash flow or resource the changes needed to deal with additional regulations, including new customs requirements.
Something that was also highlighted in the recent budget forecast was growth. It was announced that it is expected to carry on slowing over the next five years, never exceeding more than 2% nationally, and a rise in interests is also expected.
Commenting on the report, David Duffy, Chief Executive Officer at 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."
Small and medium businesses are essential to the productivity and prosperity of the UK economy. There are 5.5 million SMEs, 16.1 million People are employed by them (60% of the private sector employment) and they account for 51% of the UK’s total business revenue (£1.9 trillion a year). Sustained poor performance by SMEs could have a significant and long term negative impact on the economy. Therefore CYBG are calling on the government to make changes sooner rather than later and do more to help businesses manage their costs and restore confidence.
