Scotland bucks UK trend with a rise in SME business confidence

The health of SMEs in Scotland has improved in the second quarter of 2018, according to latest research by CYBG, in partnership with economic consultancy, the Centre for Business and Economics Research (Cebr).

The report has revealed that the SME Health Check Index in Scotland increased by four points to 40 in the second quarter.

The confidence indicator was the primary factor underlying this shift, rising to its highest level in three years. Figures also show some early signs that productivity growth is beginning to pick up, which will be key in sustaining growth in the medium to long term.

The SME Health Check Index is designed to measure SME business performance and the business and macroeconomic environment within which SMEs operate.

At a national level, the report highlights that the health of UK SMEs was stable for the second quarter of 2018, but at 47.1 points, the Index is at its second lowest level in four years.

Key data shows the economy did regain some momentum in Q2.

Following the wide spread disruption caused by adverse weather at the start of the year, activity was pushed into the second quarter, particularly in the construction sector. However, despite the improvement in the GDP and capacity indicators, there was no material increase in the Index score, due to the slowdown in employment growth and fall in lending.

Gavin Opperman, group customer banking director, at CYBG, said: “The latest SME Health Check Index demonstrates just how much can change for SMEs quarter to quarter. Our last report indicated a difficult start to 2018 and the weather conditions didn’t help matters, so this quarter provides some grounds for optimism. GDP and capacity have made gains, and the Index remains steady, dropping by only 0.5 points. This all suggests the UK economy could be on the road to recovery.

“However, on a closer look, there are still indicators causing concern, which doesn’t provide as positive a story. Employment growth is down, due to a tightening in the labour market, and, most important for us, lending has also dropped 18 points to 38. Our critical task is to ensure that the operating environment for SMEs – exporters, importers and entirely domestically focused businesses alike – is as uninterrupted as possible. As a lender, we are doing our bit and remain committed to supporting SMEs navigate this challenging market and are on track to meet our £6bn three-year lending pledge.”