Scottish SMEs experience decline in business health in the first quarter of the year

Scottish SMEs experience decline in business health in the first quarter of the year

Gavin Opperman

Clydedale Bank owner CYBG’s latest SME Health Check Index dropped by 6.6 points to 48.5 at a national level in the first quarter of 2019, its lowest rating for a year, driven by lower SME borrowing and an increase in businesses operating below capacity.

Scotland experienced a 7.9 point decline to 35.5 points in the SME Health Check Index in Q1 2019 - the lowest the Index has been since it began in 2014. This was due to significant drops in the capacity, confidence and revenue indicators.
 
Following last quarter’s special report into the health of SMEs in 25 UK cities, this Index examined the growth rates of business populations in various sectors at a city level.
 
In Scotland, Glasgow ranks in the highest position at number 15th, followed by Edinburgh in 19th place and Aberdeen finishing last in the 25th spot. Aberdeen had the lowest growth in SME numbers of anywhere in the UK in the four years between 2014 and 2018, growing just 1 per cent. The city experienced a 12 per cent decline in the number of SMEs in the professional, scientific and technical activities sector placing a major drag on the city’s overall growth rate.
 
In Glasgow, there has been a 33 per cent increase in the financial services SME population and a 34 per cent increase in the information and communications sector, while Edinburgh’s ranking has reinforced its status in the UK’s tech sector, with SMEs specialising in computer programming alone accounting for almost a sixth of the increase in business population. Across Scotland there has been a decline in the number of businesses in the wholesale and retail sectors, although the rise in the number of firms in the information and communications sectors has been the third fastest in the UK - behind London and the North East.
 
The report is published in partnership with leading economic consultancy, the Centre for Economics and Business Research (Cebr). Despite the gloomy top line figure, and persistent low confidence amongst the country’s SMEs, there are grounds for cautious optimism with GDP and employment both slowly increasing. 
 
However, there is concern that some of the rebound in activity at the start of the year was related to Brexit contingency planning and the underlying picture is less promising than the headline figures suggest. It remains unclear if pre-Brexit stockpiling will continue in the run up to the new 31st October expected Brexit date.



Gavin Opperman, group customer banking director, at CYBG, said: “The latest SME Health Check Index paints a picture of resilient SMEs despite low confidence and a reluctance to borrow.As a bank, it is our mission to help businesses grow. We expect that a future uptick in confidence will increase willingness to borrow to fund growth. 
 
“The deep dive into the city information gave us some rich insight into the regional picture, so this time we have chosen to take a closer look at how business creation has evolved on a city-by-city basis. Aberdeen’s dependence on the weak oil and gas sector means that it has the lowest score of any UK city but the SME sectors in Glasgow and Edinburgh have been more dynamic with growth in line with the UK average.”

Share icon
Share this article: