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SME confidence at a record low, CYBG data

CYBG’s latest SME Health Check Index rose to 54.9, the highest level in six quarters, with SMEs continuing to hire staff and taking employment rates to record levels. In contrast, the confidence indicator fell to its lowest level since the SME Health Check began in 2014.

SME confidence at a record low, CYBG data
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The report, which is published in partnership with leading economic consultancy the Centre for Economics and Business Research (Cebr), covers Q4 2018 and also revealed that businesses have increased their borrowing, with lending reaching the highest level since this index began tracking in 2014.

This was, however, accompanied by plummeting confidence levels, which reduced 12 points to the lowest level since the index launched in 2014, as well as a 0.9 per cent decrease in investment. Despite decelerating GDP growth and continued uncertainty about Brexit, CYBG judged that SMEs seemed optimistic, albeit wary.

From the seven indicators surveyed, five showed improvement, with Q4 2018 witnessing a welcome slow-down in business cost inflation. It fell to 2.8 per cent, which is 0.2 per cent lower than the rate recorded in the third quarter, driven mostly by a slowdown in price growth for commercial rents and physical inputs as employment cost inflation continued to accelerate.

"The latest SME Health Check Index shows a nuanced picture, but one which gives me cause for optimism, as the country’s SMEs seem poised for greater growth and success when the Brexit fog clears. They are showing resilience and resolve with strong employment growth, positive net business formation and increased borrowing, which is all good news for UK plc," Gavin Opperman, group business banking director at CYBG, said.

He noted that decelerating GDP growth, partly driven by a slowdown in the global economy and increased household borrowing, feeds into decreased confidence.

SME health on city basis

For the first time, the CYBG Index examined the health of SMEs on a city basis to add extra depth and insight to the regional picture. Shining a light on the performance of cities shows that London is falling back and there is more economic dynamism coming from the Midlands and the North - including Birmingham and Manchester as regional powerhouses.

Cambridge comes out top in contrast to nearby Norwich, which sits near the bottom of the city league. In Scotland, Edinburgh sits in fifth place on the overall city leader board, while Glasgow and Aberdeen are both mid-ranked. The North East cluster of Newcastle, Sunderland and Middlesbrough all recorded some of the lowest indicators among SMEs surveyed in these cities.

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