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Peer2Peer Finance News | August 25, 2019

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SMEs’ economic health hits 18-month high

SMEs’ economic health hits 18-month high
Suzie Neuwirth

INCREASED lending to small- and medium-sized enterprises (SMEs) has helped their economic strength reach an 18-month high, a new index claims.

The SME Health Check Index, released on Thursday, rose from 46.9 in the first three months of 2017 to 58.9 in the second quarter – the highest reading since the last quarter of 2015.

The quarterly index is compiled by economics consultancy Centre for Economics and Business Research (Cebr) in association with CYBG, owner of Clydesdale and Yorkshire Banks. It measures business performance and the macroeconomic operating environment affecting SMEs, including bankruptcies, business costs, capacity, confidence, employment, gross domestic product, lending and revenue.

Read more: SMEs’ financial health falls to lowest level in three years

“Latest data from the British Bankers’ Association (BBA) highlighted that lending to SMEs in the UK stood at £94.6bn in the first quarter of 2017, up 0.2 per cent from £94.4bn in the previous quarter,” the report said.

“The data highlights the strongest increase in lending to the UK’s SMEs in 18 months. It is also plausible to assume that some firms are taking advantage of the relatively low interest rates offered by lenders as the Bank of England base rate remains at its historic low.

“The lending indicator reached its highest score since late 2015 and had a positive impact on the SME Health Check Index.”

Business confidence weakened in the last quarter, but SME confidence remains higher than it was throughout the whole of 2016, according to the research, adding to hopes that the UK economy will gain momentum throughout the remainder of the year.

Read more: SMEs need certainty amid sluggish growth, warns CBI

“We greet these results with cautious optimism,” said David Duffy, chief executive at CYBG.

“This quarter’s index marks a return to the improving SME operating environment we saw throughout 2016 following a fall in the index in the last quarter.

“However there is no room for complacency.  The UK’s future economic success will depend in no small part on the strength and general ‘health’ of our SME businesses – securing a path to sustained and stronger growth among SMEs is vital for unlocking improvements in the UK’s overall productivity and business competitiveness.”

Read more: 3pc of SMEs obtained finance under bank referral scheme