Scottish SME health falls to lowest in UK after poor first quarter

Falling sales and confidence levels among Scottish SMEs in the first quarter of the year mean they now have the weakest business confidence of anywhere in the UK, according to a report out today.

Gavin Opperman, group customer banking director at CYBG. Picture: CYBG
Gavin Opperman, group customer banking director at CYBG. Picture: CYBG

The latest SME health check index by Clydesdale Bank owner CYBG found sentiment among smaller firms to have reached the lowest level since it was launched in 2014.

The report also found that Aberdeen had the lowest business creation growth rate of any major UK city.

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CYBG’s latest UK-wide health check index, published in partnership with the Centre for Economics and Business Research, dropped by 6.6 points to 48.5 in the first quarter of 2019, its lowest rating for a year.

But Scotland experienced a 7.9 point decline to 35.5, with significant drops seen in indicators around capacity, confidence and revenues.

However, the annual rate of net business creation in Scotland rose by 0.4 percentage points to 4.1 per cent in the quarter, bringing it closer to the UK average.

Gavin Opperman, group customer banking director at CYBG, said despite the gloomy top line figure and “persistent” low confidence amongst the country’s SMEs, there were grounds for “cautious optimism” with GDP and employment both slowly increasing.

However, he said there is concern that some of that improvement 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 31 October expected Brexit date,” he said.

In terms of business population growth in major UK cities, the report ranks Glasgow as the highest Scottish city at 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, increasing by 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.

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, 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.

Earlier this year, a survey found that small businesses in Scotland were expecting to face greater difficulties than their counterparts elsewhere in the UK after Brexit has taken place, as ongoing negotiations take a toll on small firms.